-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HmRWV7UWFEkBn3AL0WGK75s6Fz4JzhoMlp8WJaVoJqg8amuM3nrd1BoyIId6tPtt ahwpxA1n6ZCvtl8WncjClg== 0000930661-97-001531.txt : 19970616 0000930661-97-001531.hdr.sgml : 19970616 ACCESSION NUMBER: 0000930661-97-001531 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 16 FILED AS OF DATE: 19970613 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISER OIL CO CENTRAL INDEX KEY: 0000107874 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 550522128 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29211 FILM NUMBER: 97623926 BUSINESS ADDRESS: STREET 1: 8115 PRESTON RD STE 400 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2142650080 MAIL ADDRESS: STREET 1: 8115 PRESTON ROAD STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 75225 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISER OIL DELAWARE INC CENTRAL INDEX KEY: 0001040813 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29211-01 FILM NUMBER: 97623927 BUSINESS ADDRESS: STREET 1: 8115 PRESTON ROAD STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 72525 BUSINESS PHONE: 2142650080 MAIL ADDRESS: STREET 1: 1700 PACIFIC AVENUE SUITE 3300 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISER DELAWARE LLC CENTRAL INDEX KEY: 0001040815 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29211-02 FILM NUMBER: 97623928 BUSINESS ADDRESS: STREET 1: 8115 PRESTON ROAD STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 72525 BUSINESS PHONE: 2142650080 MAIL ADDRESS: STREET 1: 1700 PACIFIC AVENUE SUITE 3300 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: T W O C INC CENTRAL INDEX KEY: 0001040816 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29211-03 FILM NUMBER: 97623929 BUSINESS ADDRESS: STREET 1: 8115 PRESTON ROAD STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 72525 BUSINESS PHONE: 2142650080 MAIL ADDRESS: STREET 1: 1700 PACIFIC AVENUE SUITE 3300 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISER OIL CO OF CANADA CENTRAL INDEX KEY: 0001040824 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29211-04 FILM NUMBER: 97623930 BUSINESS ADDRESS: STREET 1: 8115 PRESTON ROAD STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 72525 BUSINESS PHONE: 2142650080 MAIL ADDRESS: STREET 1: 1700 PACIFIC AVENUE SUITE 3300 CITY: DALLAS STATE: TX ZIP: 75201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISER MARKETING CO CENTRAL INDEX KEY: 0001040825 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-29211-05 FILM NUMBER: 97623931 BUSINESS ADDRESS: STREET 1: 8115 PRESTON ROAD STREET 2: SUITE 400 CITY: DALLAS STATE: TX ZIP: 72525 BUSINESS PHONE: 2142650080 MAIL ADDRESS: STREET 1: 1700 PACIFIC AVENUE SUITE 3300 CITY: DALLAS STATE: TX ZIP: 75201 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 13, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------- THE WISER OIL COMPANY (EXACT NAME OF CO-REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 55-0522128 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) File No. File No. File No. File No. File No. 333- 333- 333- 333- 333- WISER OIL WISER THE WISER THE WISER T.W.O.C., DELAWARE, DELAWARE LLC MARKETING OIL COMPANY INC. INC. (Exact name COMPANY OF CANADA (Exact name (Exact name of Co- (Exact name (Exact name of Co- of Co- Registrant of Co- of Co- Registrant Registrant as specified Registrant Registrant as specified as specified in its as specified as specified in its in its charter) in its in its charter) charter) charter) charter) DELAWARE DELAWARE DELAWARE NOVA SCOTIA DELAWARE (State or (State or (State or (State or (State or other other other other other jurisdiction jurisdiction jurisdiction jurisdiction jurisdiction of of of of of incorporation incorporation incorporation incorporation incorporation or or or or or organization) organization) organization) organization) organization) 75-2699737 75-2707365 61-1183511 75-2707371 51-0323142 (I.R.S. (I.R.S. (I.R.S. (I.R.S. (I.R.S. Employer Employer Employer Employer Employer dentificationI Identification Identification Identification Identification No.) No.) No.) No.) No.) 1311 (Primary Standard Industrial Classification Code Number) ANDREW J. SHOUP, JR. 8115 PRESTON ROAD, SUITE 400 PRESIDENT AND CHIEF EXECUTIVE OFFICER DALLAS, TEXAS 75225 THE WISER OIL COMPANY (214) 265-0080 8115 PRESTON ROAD, SUITE 400 (ADDRESS, INCLUDING ZIP CODE, DALLAS, TEXAS 75225 AND TELEPHONE NUMBER, INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, AND AREA CODE, OF CO-REGISTRANTS' TELEPHONE NUMBER, INCLUDING AREA CODE, OF PRINCIPAL EXECUTIVE OFFICES) AGENT FOR SERVICE) (214) 265-0080 ------------- COPIES TO: STEVEN K. COCHRAN PAUL M. JOHNSTON THOMPSON & KNIGHT, A PROFESSIONAL CORPORATION 1700 PACIFIC AVENUE, SUITE 3300 DALLAS, TEXAS 75201 (214) 969-1700 ------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] ------------- CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROPOSED PROPOSED TITLE OF EACH CLASS OF MAXIMUM MAXIMUM SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF REGISTERED(1) BE REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE - -------------------------------------------------------------------------------------- 9 1/2% Senior Subordinated Notes due 2007................. $125,000,000 100% $125,000,000 $37,878.79 - -------------------------------------------------------------------------------------- Guaranties of 9 1/2% Senior Subordinated Notes due 2007....... (2) (2) (2) (2) - --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- (1) The issuer of the Notes registered hereby is The Wiser Oil Company. The guaranties registered hereby are made by Wiser Oil Delaware, Inc., Wiser Delaware LLC, The Wiser Marketing Company, The Wiser Oil Company of Canada and T.W.O.C., Inc. (2) No additional consideration will be received for the guaranties of the Notes registered hereby. ------------- THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED JUNE 13, 1997 PROSPECTUS THE WISER OIL COMPANY OFFER TO EXCHANGE ITS 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED (THE "EXPIRATION DATE") The Wiser Oil Company, a Delaware corporation (the "Company" or "Wiser"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (as the same may be amended or supplemented from time to time, this "Prospectus") and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange up to $125,000,000 aggregate principal amount of its 9 1/2% Senior Subordinated Notes due 2007 (the "Exchange Notes") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined) of which this Prospectus constitutes a part, for a like aggregate principal amount of its outstanding 9 1/2% Senior Subordinated Notes due 2007 (the "Outstanding Notes" and, together with the Exchange Notes, the "Notes"), of which $125,000,000 aggregate principal amount is outstanding. The terms of the Exchange Notes are identical in all material respects to the terms of the Outstanding Notes, except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except for certain provisions providing for an increase in the interest rate on the Outstanding Notes under certain circumstances relating to the timing of the Exchange Offer. The Outstanding Notes were sold by the Company on May 21, 1997 to Salomon Brothers Inc, NationsBanc Capital Markets, Inc. and Nesbitt Burns Securities Inc. (collectively, the "Initial Purchasers") pursuant to an offering exempt from registration under the Securities Act. The Outstanding Notes are and the Exchange Notes will be unsecured obligations of the Company, subordinated in right of payment to all existing and any future Senior Indebtedness (as defined) of the Company. The Outstanding Notes rank and the Exchange Notes will rank pari passu with any future senior subordinated indebtedness and senior to any future junior subordinated indebtedness of the Company. See "Description of the Exchange Notes-- Subordination." The Outstanding Notes are and the Exchange Notes will be fully and unconditionally guaranteed on an unsecured, senior subordinated basis by certain Restricted Subsidiaries (as defined). However, each of the Initial Subsidiary Guarantors (as defined) has also agreed to guarantee indebtedness outstanding under the Credit Agreement (as defined), which indebtedness will constitute Senior Indebtedness. In addition, all indebtedness and other liabilities of the Company's subsidiaries that are not Subsidiary Guarantors (as defined) will be effectively senior in right of payment to the Notes and the Subsidiary Guaranties (as defined). At March 31, 1997, after giving effect to the Credit Agreement Amendments (as defined), the offering of the Outstanding Notes (the "Offering") and the application of the estimated net proceeds of the Offering, (i) Senior Indebtedness would have been less than $1.0 million (not including $80.0 million of borrowing capacity available under the Credit Agreement, which, if borrowed, would be Senior Indebtedness), (ii) the Company would have had no senior subordinated indebtedness other than the Outstanding Notes and (iii) the total indebtedness and other liabilities (including trade payables, deferred taxes and accrued liabilities, but excluding any obligations owed to affiliates) of the Company's subsidiaries that are not Subsidiary Guarantors would have been less than $0.5 million. Subject to certain limitations set forth in the Indenture (as defined), the Company and its subsidiaries (including the Subsidiary Guarantors) may incur additional Indebtedness (as defined), including Indebtedness that would be senior to or pari passu with the Notes. See "Use of Proceeds," "Capitalization," "Description of Certain Senior Indebtedness" and "Description of the Exchange Notes." The Exchange Notes are being offered for exchange in order to satisfy certain obligations of the Company and the Initial Subsidiary Guarantors under the Registration Agreement dated May 21, 1997 (the "Registration Agreement") between the Company, the Initial Subsidiary Guarantors and the Initial Purchasers.The Exchange Notes will be issued under the same Indenture as the Outstanding Notes, and the Exchange Notes and the Outstanding Notes will constitute a single series of debt securities under the Indenture. In the event that the Exchange Offer is consummated, any Outstanding Notes that remain outstanding after consummation of the Exchange Offer and the Exchange Notes issued in the Exchange Offer will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount of the Notes have taken certain actions or exercised certain rights under the Indenture. SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1997. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM THE WISER OIL COMPANY, 8115 PRESTON ROAD, SUITE 400, DALLAS, TEXAS 75225, ATTENTION: CORPORATE SECRETARY, TELEPHONE (214) 265-0080. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1997. The Company is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "SEC") as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the SEC would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Outstanding Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such Exchange Notes. However, any holder of the Outstanding Notes who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or who intends to participate in the Exchange Offer for the purpose of distributing Exchange Notes, or any broker-dealer who purchased Outstanding Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the SEC set forth in the above mentioned interpretive letters, (b) will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Outstanding Notes unless such sale is made pursuant to an exemption from such requirements. In the event that applicable interpretations by the staff of the Division of Corporation Finance of the SEC change or otherwise do not permit resales of the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act, holders of Exchange Notes who transfer Exchange Notes in violation of the prospectus delivery provisions of the Securities Act or without an exemption from registration thereunder may incur liability thereunder. Each holder of Outstanding Notes who wishes to exchange Outstanding Notes for Exchange Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any Exchange Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes and (iv) if such holder is not a broker-dealer, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities (a "Participating Broker-Dealer"), must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the SEC in the interpretive letters referred to above, the Company believes that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes received upon exchange of such Outstanding Notes (other than Outstanding Notes that represent an unsold 2 allotment from the original sale of the Outstanding Notes) with a prospectus meeting the requirements of the Securities Act, that may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such Exchange Notes. Accordingly, this Prospectus may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making activities or other trading activities. Subject to certain provisions set forth in the Registration Agreement, the Company has agreed that, for a period of up to 90 days after the consummation of the Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. Any Participating Broker-Dealer who is an "affiliate" of the Company may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer--Resales of Exchange Notes" and "Plan of Distribution." Each Participating Broker-Dealer who surrenders Outstanding Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Agreement, such Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to each such Participating Broker-Dealer or the Company has given notice that the sale of Exchange Notes may be resumed, as the case may be. Prior to the Exchange Offer, there has been only a limited secondary market and no public market for the Outstanding Notes. The Exchange Notes will be a new issue of securities for which there is currently no market. Although the Initial Purchasers have informed the Company that they each currently intend to make a market in the Exchange Notes, they are not obligated to do so, and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. The Company currently does not intend to apply for listing of the Exchange Notes on any securities exchange or for quotation of the Exchange Notes through the National Association of Securities Dealers Automated Quotation System. Any Outstanding Notes not tendered and accepted in the Exchange Offer will remain outstanding and will be entitled to all the same rights and will be subject to the same limitations applicable thereto under the Indenture (except for those rights that terminate upon the consummation of the Exchange Offer). Following consummation of the Exchange Offer, the holders of Outstanding Notes will continue to be subject to the existing restrictions upon transfer thereof and the Company will have no further obligation to such holders (other than Initial Purchasers or under certain limited circumstances relating to holders who are not eligible to participate in the Exchange Offer) to provide for the registration under the Securities Act of the Outstanding Notes held by them. If Outstanding Notes are tendered and accepted in the Exchange Offer, the market for untendered Outstanding Notes is likely to diminish; accordingly, holders who do not tender their Outstanding Notes may encounter difficulties in selling such notes following the Exchange Offer. See "Risk Factors-- Consequences of a Failure to Exchange Outstanding Notes." THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OUTSTANDING NOTES ARE URGED TO READ THIS PROSPECTUS 3 AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER. Outstanding Notes may be tendered for exchange prior to 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). Tenders of Outstanding Notes may be withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Outstanding Notes being tendered or accepted for exchange. However, the Exchange Offer is subject to certain events and conditions that may be waived by the Company and to the terms and provisions of the Registration Agreement. See "The Exchange Offer--Conditions to the Exchange Offer." Outstanding Notes may be tendered for exchange in whole or in part in a principal amount of $1,000 and integral multiples thereof. Each Exchange Note will bear interest from the most recent date to which interest has been paid or duly provided for on the Outstanding Note surrendered in exchange for such Exchange Note or, if no such interest has been paid or duly provided for on such Outstanding Note, from May 21, 1997. Holders of the Outstanding Notes whose Outstanding Notes are accepted for exchange will not receive accrued interest on such Outstanding Notes for any period from and after the last interest payment date to which interest has been paid or duly provided for on such Outstanding Notes prior to the original issue date of the Exchange Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Outstanding Notes, and will be deemed to have waived the right to receive any interest on such Outstanding Notes accrued from and after such interest payment date or, if no such interest has been paid or duly provided for, from and after May 21, 1997. This Prospectus, together with the Letter of Transmittal, is being sent to all registered holders of the Outstanding Notes as of , 1997. The Company will not receive any cash proceeds from the issuance of the Exchange Notes offered hereby. See "Use of Proceeds." No dealer-manager is being used in connection with the Exchange Offer. See "Plan of Distribution." Solicitation of tenders of Outstanding Notes may be made in person or by mail, telephone or telegram, by directors, officers and regular employees of the Company. Such persons will receive no additional compensation for any solicitation activities. The Company may employ third-party agents to solicit tenders of Outstanding Notes, for which services such agents would be paid their usual and customary fee. The Company has agreed to pay the expenses of the Exchange Offer. 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and the Consolidated Financial Statements, including the notes thereto, and other financial information included or incorporated by reference in this Prospectus. References to the "Company" or "Wiser" include The Wiser Oil Company and its consolidated subsidiaries. Unless otherwise indicated, all references to dollars or $ are to U.S. dollars. Certain terms used but not defined in the summary are defined elsewhere in this Prospectus, including certain terms used in the oil and gas industry defined in "Glossary of Oil and Gas Terms." As noted in such Glossary, Present Value is the present value (using an annual discount rate of 10%) of estimated future net revenues from the production of proved reserves, without giving effect to income taxes. THE COMPANY Founded in 1905, The Wiser Oil Company is one of the oldest public independent oil and gas companies in the United States. In recent years, the Company has successfully implemented a new business strategy adopted in 1991, emphasizing growth in reserves and production volumes through acquisitions and subsequent development and exploitation of acquired properties. Since its change in strategic direction, the Company's total proved reserves have grown to 50.5 MMBOE (approximately 63% of which were oil and NGLs) at December 31, 1996 from 24.3 MMBOE at December 31, 1991, and its annual net production has grown to 4.7 MMBOE in 1996 from 2.3 MMBOE in 1991. The Company's primary operations, representing approximately 62% of its proved reserves at December 31, 1996, are located in the Permian Basin in West Texas and Southeast New Mexico. Wiser has additional operations in Alberta, Canada, the Appalachian Basin in Kentucky, Tennessee and West Virginia and the San Juan Basin in New Mexico. Prior to 1991 the Company focused primarily on the acquisition of non-operated interests in oil and gas properties. In 1991 the Company moved its headquarters from Sistersville, West Virginia to Dallas, Texas and began to assemble an experienced management team with substantial acquisition, exploitation and development expertise. After reviewing the Company's existing property portfolio and refining the new business strategy, the management team began disposing of the Company's non-strategic assets and acquiring and operating properties in new core areas with the potential for increased reserves and production volumes. Pursuant to this strategy, the Company acquired and developed properties in the Permian Basin and Canada, and successfully added reserves and production through workovers, recompletions, waterfloods and CO/2/ gas injections, as well as the drilling of exploratory, development and infill wells. A substantial portion of the Company's growth in reserves and production volumes since 1991 has been the result of (i) two successful enhanced oil recovery projects on properties acquired from 1992 to 1995 in the Permian Basin and (ii) the Company's 1994 acquisition and subsequent exploration on and exploitation of properties in Alberta, Canada. From June 1993 through December 1996, the Company completed 113 producing wells on its Maljamar waterflood project in Southeast New Mexico. As a result, the Company's average daily net oil production from the three units in this project increased to 2,800 Bbls in December 1996 from 580 Bbls in January 1993 (on a pro forma combined basis, assuming the Company had acquired all three units at January 1, 1993). At its Wellman Unit in West Texas, the Company used CO/2/ gas injection and refurbished a natural gas processing plant to increase average daily net production to 927 Bbls of oil, 440 Bbls of NGLs and 547 Mcf of natural gas in December 1996 from 650 Bbls of oil and no NGLs or natural gas in December 1993. In June 1994 the Company acquired oil and gas properties located primarily in Alberta, Canada for $52.0 million. From the date of this acquisition through December 1996, the Company completed 22 net wells on these properties. As a result, the Company's average daily net Canadian production increased to 3,200 BOE in December 1996 from 1,860 BOE in June 1994. The Company's principal executive offices are located at 8115 Preston Road, Suite 400, Dallas, Texas 75225, and its telephone number is (214) 265-0080. 5 BUSINESS STRATEGY The Company's strategy is to grow reserves and production volumes through (i) acquiring producing properties that provide significant development and exploitation potential, (ii) developing and exploiting its reserve base in order to maximize production and recoverable reserves and (iii) exploring for oil and gas reserves, while (iv) maintaining financial flexibility. PURSUE STRATEGIC ACQUISITIONS. Over the last several years, the Company has assembled an experienced management team which uses a comprehensive interdisciplinary and technical approach to evaluate potential acquisitions of oil and gas properties. The Company's property acquisition criteria include: (a) existing oil and gas production; (b) significant potential for increasing reserves and production through development, exploitation (including enhanced recovery techniques) or exploration; (c) proximity to the Company's existing core operating areas or, in the alternative, sufficient critical mass to justify diversification into a new area; (d) opportunities to lower unit costs; and (e) an attractive purchase price. In addition, the Company will continue to consider strategic combinations with other industry participants in order to achieve operating synergies, greater asset diversification and enhanced financial flexibility. CAPITALIZE UPON DEVELOPMENT AND EXPLOITATION EXPERTISE. The Company believes that one of its primary strengths is its expertise and experience in the exploitation of oil and gas properties through enhanced recovery operations and other methods. The Company believes that this strength differentiates it from other independent oil and gas companies of similar size. The Company has successfully added reserves and production volumes to existing and acquired properties through workovers, recompletions, waterfloods and CO/2/ gas injections, as well as the drilling of development or infill wells. The Company's success in the Maljamar waterflood project and the Wellman Unit CO/2/ gas injection project exemplify how the Company has capitalized on this core competency. The Company has budgeted $20.3 million for development and exploitation activities at the Maljamar and Wellman projects in 1997, and intends to continue to seek opportunities that would allow it to utilize further its development and exploitation expertise. EXPAND EXPLORATION PROGRAM. The Company is increasingly placing greater emphasis on exploration as a source of future growth, and focuses on exploration opportunities that can benefit from advanced technologies, including 3-D seismic, designed to reduce risks and increase success rates. In 1996 the Company hired a new Vice President of Exploration with over 33 years of exploration experience with major integrated and independent oil and gas companies to lead its domestic exploration group. This group is developing a balanced portfolio of exploration prospects in areas where it believes multiple prospects could be developed if a significant discovery were made. In addition, this group is responsible for domestic exploration activities on existing properties. In Canada, exploration has represented a significant portion of the Company's capital budget since 1994. The Company's activities for the winter 1996/1997 Canadian drilling season included participation in five gross exploratory wells (four of which were successful) to test five prospects. On a Company-wide basis, the 1997 exploration budget comprises $13.0 million (approximately 29%) of the Company's $44.3 million 1997 capital expenditure program, compared with exploration expenditures of $3.5 million (approximately 8%) of the Company's total capital expenditures of $46.2 million in 1996. MAINTAIN FINANCIAL FLEXIBILITY. The Company is committed to maintaining financial flexibility, which it believes is important for the successful implementation of its growth strategy. The Company currently expects its 1997 capital expenditure budget (excluding any property acquisitions) to be funded primarily by internally generated cash flow, including the sale of its remaining marketable securities. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, the Company would have had (i) approximately $50.9 million of cash and marketable securities, (ii) no 6 long-term debt other than the Outstanding Notes and (iii) $80.0 million of borrowing capacity available under the Credit Agreement. The Company currently intends to make use of its excess cash, its marketable securities and its available borrowing capacity to implement its growth strategy. RECENT DEVELOPMENT On May 13, 1997, the Company entered into a letter of intent with respect to the proposed purchase by Wiser from a private company of certain oil and gas leasehold and other mineral interests located in south Texas for $15.2 million in cash. The consummation of the acquisition is subject to satisfaction of certain conditions, including the negotiation and execution of definitive documentation, the completion of satisfactory due diligence by the Company, including title and environmental review, and approval by the Company's Board of Directors. The acquisition is expected to close in June 1997. 7 THE EXCHANGE OFFER Exchange Offer.............. Up to $125,000,000 aggregate principal amount of Exchange Notes are being offered in exchange for a like aggregate principal amount of Outstanding Notes. Outstanding Notes may be tendered for exchange in whole or in part in a principal amount of $1,000 and integral multiples thereof. The Company is making the Exchange Offer in order to satisfy its obligations under the Registration Agreement relating to the Outstanding Notes. Subject to the terms and conditions of the Exchange Offer, the Company will issue the Exchange Notes to tendering holders of the Outstanding Notes promptly following the Expiration Date. Registration Agreement...... The Outstanding Notes were sold by the Company on May 21, 1997 to the Initial Purchasers, who placed the Outstanding Notes in the United States with "Qualified Institutional Buyers" in reliance on Rule 144A under the Securities Act and outside the United States with non-U.S. persons in reliance upon Regulation S under the Securities Act. In connection therewith, the Company and the Initial Subsidiary Guarantors executed and delivered for the benefit of the holders of the Outstanding Notes the Registration Agreement providing for, among other things, the Exchange Offer. Expiration Date............. 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended by the Company. See "The Exchange Offer--Terms of the Exchange Offer" and "--Extensions and Amendments." Conditions to the Exchange The Exchange Offer is subject to certain Offer...................... conditions, which may be waived by the Company in its sole discretion. See "The Exchange Offer-- Conditions to the Exchange Offer." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Outstanding Notes being tendered or accepted for exchange. The Company reserves the right (i) to delay the acceptance of the Outstanding Notes for exchange, (ii) to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of certain conditions, (iii) to extend the Expiration Date of the Exchange Offer and retain all of the Outstanding Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of the Outstanding Notes to withdraw their tendered Outstanding Notes, and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. See "The Exchange Offer-- Extensions and Amendments" and "--Conditions to the Exchange Offer." Procedures for Tendering Outstanding Notes.......... Each holder of Outstanding Notes wishing to accept the Exchange Offer must complete, sign and date the Letter of 8 Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, or an Agent's Message, together with either certificates for such Outstanding Notes or a Book-Entry Confirmation of such Outstanding Notes, if such procedure is available, into the Exchange Agent's account at the Book-Entry Transfer Facility, and any other required documentation, to the Exchange Agent at the address set forth herein. By executing the Letter of Transmittal each holder will represent to the Company that, among other things, (i) the Exchange Notes acquired pursuant to the Exchange Offer by the holder and any beneficial owner of Outstanding Notes are being acquired in the ordinary course of business of the person receiving such Exchange Notes, (ii) neither the holder nor such beneficial owner is participating in, intends to participate in or has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes and (iii) neither the holder nor such beneficial owner is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company, or, if it is an affiliate of the Company, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market- making activities or other trading activities, may participate in the Exchange Offer but may be deemed an "underwriter" under the Securities Act and, therefore, must acknowledge in the Letter of Transmittal that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Company has agreed that, for a period of up to 90 days after the consummation of the Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. See "The Exchange Offer--Resales of Exchange Notes" and "Plan of Distribution." Special Procedures for Beneficial Owners.......... Any beneficial owner whose Outstanding Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender such Outstanding Notes in the Exchange Offer should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on its own behalf, such owner must, prior to completing and executing the Letter of Transmittal and 9 delivering its Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time and may not be able to be completed prior to the Expiration Date. Guaranteed Delivery Procedures................. Holders of Outstanding Notes who wish to tender their Outstanding Notes and whose Outstanding Notes are not immediately available or who cannot deliver their Outstanding Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Outstanding Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for Tendering Outstanding Notes--Guaranteed Delivery." Withdrawal Rights........... Tenders of Outstanding Notes may be withdrawn at any time prior to the Expiration Date. See "The Exchange Offer-- Withdrawal Rights." Certain Federal Income Tax Considerations............. The exchange of the Outstanding Notes for Exchange Notes by tendering holders should not be a taxable exchange for U.S. federal income tax purposes, and such holders should not recognize any taxable gain or loss for U.S. federal income tax purposes as a result of such exchange. Holders of Exchange Notes will continue to be required to include interest received on such Exchange Notes in gross income in accordance with their method of accounting for U.S. federal income tax purposes. Holders should review the information set forth under "Certain Federal Income Tax Considerations" for a discussion of certain U.S. tax considerations relating to the Exchange Notes prior to tendering the Outstanding Notes in the Exchange Offer. Use of Proceeds............. The Company will not receive any cash proceeds from the issuance of the Exchange Notes offered hereby. Of the net proceeds of the Offering, approximately $77.0 million was used to pay in full all outstanding indebtedness under the Credit Agreement, and the balance will be used for general corporate purposes. See "Use of Proceeds." Exchange Agent.............. Texas Commerce Bank National Association is serving as Exchange Agent in connection with the Exchange Offer. See "The Exchange Offer--Exchange Agent." 10 THE EXCHANGE NOTES Exchange Notes.............. $125,000,000 in aggregate principal amount of 9 1/2% Senior Subordinated Notes due 2007, which have been registered under the Securities Act. The form and terms of the Exchange Notes are identical in all material respects to the terms of the respective Outstanding Notes for which they may be exchanged pursuant to the Exchange Offer, except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except for certain provisions providing for an increase in the interest rate on the Outstanding Notes under circumstances relating to the timing of the Exchange Offer. See "Description of the Exchange Notes." Maturity.................... May 15, 2007. Interest on the Exchange Notes...................... The Exchange Notes will bear interest at the rate of 9 1/2% per annum, payable semiannually on May 15 and November 15 of each year, commencing November 15, 1997. Each Exchange Note will bear interest from the most recent date to which interest has been paid or duly provided for on the Outstanding Note surrendered in exchange for such Exchange Note or, if no such interest has been paid or duly provided for on such Outstanding Note, from May 21, 1997. Interest on the Outstanding Notes accepted for exchange will cease to accrue upon issuance of the Exchange Notes. Optional Redemption......... The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after May 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to May 15, 2000, up to 33 1/3% of the aggregate principal amount of the Notes originally issued is redeemable at the option of the Company, in whole or in part, from time to time, at 109.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net proceeds of one or more Equity Offerings, provided that at least 66 2/3% of the aggregate principal amount of the Notes originally issued remains outstanding immediately after such redemption. See "Description of the Exchange Notes--Optional Redemption." Subsidiary Guaranties....... The Exchange Notes will be fully and unconditionally guaranteed on an unsecured, senior subordinated basis by each of the Initial Subsidiary Guarantors under the Subsidiary Guaranties and by certain Restricted Subsidiaries if they become Significant Subsidiaries in the future. See "Description of the Exchange Notes-- Subsidiary Guaranties." 11 Subordination of Exchange Notes and Subsidiary Guaranties................. The Exchange Notes and the Subsidiary Guaranties will be unsecured obligations of the Company and the Subsidiary Guarantors, as applicable. The Exchange Notes and each Subsidiary Guaranty will be subordinated in right of payment to all existing and any future Senior Indebtedness and will rank pari passu with any future senior subordinated indebtedness and senior to any future junior subordinated indebtedness of the Company or the applicable Subsidiary Guarantor, as the case may be. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, (i) Senior Indebtedness would have been less than $1.0 million (not including $80.0 million of borrowing capacity available under the Credit Agreement, which, if borrowed, would be Senior Indebtedness), (ii) the Company would have had no senior subordinated indebtedness other than the Outstanding Notes and (iii) the total indebtedness and other liabilities (including trade payables, deferred taxes and accrued liabilities, but excluding any obligations owed to affiliates) of the Company's subsidiaries that are not Subsidiary Guarantors would have been less than $0.5 million. Subject to certain limitations set forth in the Indenture, the Company and its subsidiaries (including the Subsidiary Guarantors) may incur additional Indebtedness, including Indebtedness that would be senior to or pari passu with the Notes. See "Use of Proceeds," "Capitalization," "Description of Certain Senior Indebtedness" and "Description of the Exchange Notes." Change of Control........... Upon the occurrence of a Change of Control, the Company will be required to make an offer to purchase the Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. In the event of a Change of Control, there can be no assurance that the Company or the Subsidiary Guarantors will have the financial resources or be permitted under the terms of their other indebtedness to repurchase the Notes. See "Risk Factors-- Limitations on Purchase of Notes Upon the Occurrence of a Change of Control" and "Description of the Exchange Notes--Purchase at the Option of Holders Upon a Change of Control." Certain Covenants........... The Indenture pursuant to which the Outstanding Notes were, and the Exchange Notes will be, issued contains certain covenants that, among other things, limit the ability of the Company and its Restricted Subsidiaries to (i) incur additional Indebtedness, (ii) incur Indebtedness that is subordinate to Senior Indebtedness but senior to the Notes, (iii) pay dividends or make other distributions with respect to Capital 12 Stock or Redeemable Stock or purchase, redeem or retire Capital Stock or Redeemable Stock or make other Restricted Payments, (iv) enter into certain transactions with Affiliates, (v) create certain Liens, (vi) enter into certain consolidations, mergers and transfers of assets, (vii) issue any Capital Stock of a Restricted Subsidiary or permit any Person other than the Company or a Wholly Owned Restricted Subsidiary to own such stock, (viii) permit any Restricted Subsidiary to suffer to exist certain types of restrictions on the ability of Restricted Subsidiaries to pay dividends and make other transfers of assets to the Company and other Restricted Subsidiaries and (ix) dispose of the proceeds of certain Asset Sales. All of these limitations are subject to a number of important qualifications. See "Description of the Exchange Notes-- Certain Covenants" and "--Merger, Consolidation and Sale of Substantially All Assets." Listing..................... None. See "Risk Factors--Lack of Public Market." Sinking Fund................ None. For additional information with respect to the Exchange Notes (including defined terms), see "Description of the Exchange Notes." RISK FACTORS Prior to making an investment decision, prospective purchasers of the Exchange Notes should consider all of the information set forth in this Prospectus and should carefully evaluate the considerations set forth in "Risk Factors." 13 SUMMARY CONSOLIDATED FINANCIAL DATA The summary historical consolidated financial data set forth below have been derived from the Company's Consolidated Financial Statements and notes thereto contained elsewhere in this Prospectus. The financial data for the years ended December 31, 1996, 1995 and 1994 were derived from the audited consolidated financial statements of the Company. The financial data for the quarters ended March 31, 1997 and 1996 were derived from the unaudited consolidated financial statements of the Company. The summary consolidated financial data are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ---------------- ------------------------- 1997 1996 1996 1995 1994 ------- ------- ------- ------- ------- (UNAUDITED) (IN THOUSANDS, EXCEPT RATIOS) INCOME STATEMENT DATA: Revenues: Oil and gas sales................ $23,062 $16,233 $72,012 $54,400 $53,559 Dividends and interest........... 121 212 683 1,241 1,641 Marketable security sales gains........................... 1,813 2,005 12,977 13,101 7,475 Other............................ 579 117 1,017 2,939 2,681 ------- ------- ------- ------- ------- Total revenues................. 25,575 18,567 86,689 71,681 65,356 ------- ------- ------- ------- ------- Costs and expenses: Production and operating......... 6,802 5,623 23,970 20,690 22,313 Purchased natural gas............ 513 353 1,462 727 759 Depreciation, depletion and amortization.................... 5,767 4,954 19,653 19,778 18,313 Property impairments............. -- -- 12,112 4,893 -- Exploration...................... 621 1,266 4,176 5,801 4,130 General and administrative....... 2,378 2,795 9,364 8,193 6,502 Interest expense................. 1,264 1,360 5,452 5,618 3,907 ------- ------- ------- ------- ------- Total costs and expenses....... 17,345 16,351 76,189 65,700 55,924 ------- ------- ------- ------- ------- Income before income taxes....... 8,230 2,216 10,500 5,981 9,432 Income tax expense............... 2,089 705 4,072 3,788 444 ------- ------- ------- ------- ------- Net income....................... $ 6,141 $ 1,511 $ 6,428 $ 2,193 $ 8,988 ======= ======= ======= ======= ======= OTHER FINANCIAL DATA: EBITDAX (1)...................... $13,948 $ 7,579 $38,233 $27,729 $26,666 Operating cash flow.............. 7,354 5,371 33,228 19,239 23,134 Capital expenditures (2)......... 12,311 8,804 46,231 31,052 73,186 Ratios: Ratio of earnings to fixed charges (3) Historical...................... 7.5x 2.6x 2.9x 2.1x 3.4x As adjusted (4)................. 3.3x N/A 1.5x N/A N/A Ratio of EBITDAX to fixed charges (1)(3) Historical...................... 11.0x 5.6x 7.0x 4.9x 6.8x As adjusted (4)................. 4.5x N/A 3.1x N/A N/A Ratio of total debt to EBITDAX (1) Historical...................... N/A N/A 2.1x 2.7x 2.9x As adjusted (4)................. N/A N/A 3.3x N/A N/A
AT MARCH 31, 1997 ------------------------ ACTUAL AS ADJUSTED (5) -------- --------------- (UNAUDITED) (IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents.......................... $ 2,116 $ 45,120 Working capital (6)................................ 3,591 46,595 Marketable securities.............................. 5,748 5,748 Net property, plant and equipment.................. 185,343 185,343 Total assets....................................... 209,782 257,136 Long-term debt..................................... 76,908 124,262 Stockholders' equity............................... 104,424 104,424
(See footnotes on following page) 14 - -------- (1) EBITDAX is not a generally accepted accounting measure, but is presented as a supplemental financial indicator of the Company's ability to service or incur debt. EBITDAX is calculated by adding interest expense, income tax expense, depreciation, depletion and amortization, property impairment costs and exploration costs to net income (excluding marketable security sales gains and dividends and interest). EBITDAX should not be considered in isolation or as a substitute for net income, operating cash flow or any other measure of financial performance prepared in accordance with generally accepted accounting principles or as a measure of the Company's profitability or liquidity. (2) Consist of costs incurred by the Company in connection with its oil and gas acquisition, development and exploration activities, and, in certain years, costs relating to the reconditioning of its gas plants. See Note 6 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. (3) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income before income taxes and fixed charges. Fixed charges consist of interest expense. (4) The as adjusted ratios for the quarter ended March 31, 1997 and the year ended December 31, 1996 give effect to the termination of the Maljamar Credit Facility, the Offering and the application of the estimated net proceeds of the Offering as if such transactions had occurred at the beginning of the indicated period. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources--Credit Agreement." (5) The as adjusted balance sheet data at March 31, 1997 give effect to the Offering and the application of the estimated net proceeds of the Offering as if such transactions had occurred on such date. See "Use of Proceeds" and "Capitalization." (6) Working capital represents the difference between current assets and current liabilities. 15 SUMMARY RESERVE AND OPERATING DATA The following tables set forth summary reserve and operating data at the dates and for the periods indicated. The summary information relating to the Company's proved reserves, estimated future net revenues and Present Values at December 31, 1996, 1995 and 1994 is derived from estimates prepared by DeGolyer and MacNaughton (as to United States properties) and Gilbert Lausten Jung Associates Ltd. (as to Canadian properties), each of which is a firm of independent petroleum engineers. Estimates of proved reserves and future net revenues from which Present Values are derived are based on year end prices of oil and gas held constant (except to the extent a contract specifically provides otherwise) in accordance with SEC regulations. The prices of oil and gas at December 31, 1996 used to estimate the Company's proved reserves and future net revenues from which Present Value is derived were substantially higher than the prices used in previous years to make such estimates and substantially higher than oil and gas prices at May 30, 1997. For additional information regarding the effect of prices on proved reserves, estimated future net revenues and Present Values, see "Risk Factors--Uncertainty of Estimates of Reserves and Future Net Revenues" and "Business and Properties--Oil and Gas Reserves."
AT DECEMBER 31, -------------------------- 1996 1995 1994 -------- -------- -------- (DOLLARS IN THOUSANDS) PROVED RESERVES: Oil and NGLs (MBbl)............................... 31,612 32,208 23,430 Natural gas (MMcf)................................ 113,377 109,915 107,920 Oil equivalents (MBOE)........................... 50,508 50,527 41,417 Estimated future net revenues before income tax- es............................................... $705,723 $401,037 $272,776 Present Value..................................... $414,314 $235,416 $160,804 Standardized Measure of Discounted Future Net Cash Flows(1)......................................... $317,180 $194,602 $142,032
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, --------------- ----------------------- 1997 1996 1996 1995 1994 ------- ------- ------- ------- ------- PRODUCTION VOLUMES: Oil and NGLs (MBbl).................. 770 628 2,776 2,332 2,277 Natural gas (MMcf)(2)................ 3,171 3,334 12,288 12,171 11,076 Oil equivalents (MBOE)(2)........... 1,299 1,184 4,824 4,361 4,123 WEIGHTED AVERAGE SALES PRICES(3): Oil (per Bbl)........................ $ 19.60 $ 17.63 $ 18.81 $ 16.91 $ 15.60 Natural gas (per Mcf)(2)............. 2.63 1.67 1.77 1.37 1.73 NGLs (per Bbl) ...................... 15.29 12.74 13.36 10.11 9.00 Oil equivalents (per BOE)(2)........ 17.75 13.71 14.93 12.47 12.99 SELECTED EXPENSES PER BOE(4): Lease operating ..................... $ 4.23 $ 3.96 $ 4.14 $ 4.06 $ 4.54 Production taxes..................... 1.12 0.88 0.93 0.78 0.97 Depreciation, depletion and amortiza- tion................................ 4.54 4.27 4.16 4.62 4.53 General and administrative........... 1.87 2.41 1.98 1.92 1.61
- -------- (1) The Standardized Measure of Discounted Future Net Cash Flows prepared by the Company represents the present value (using an annual discount rate of 10%) of estimated future net revenues from the production of proved reserves, after giving effect to income taxes. See the Supplemental Financial Information attached to the Company's Consolidated Financial Statements included elsewhere in this Prospectus for additional information regarding the disclosure of the Standardized Measure of Discounted Future Net Cash Flows. (2) Calculated giving effect to volumes of natural gas purchased for resale as follows: first quarter of 1997--168 MMcf, first quarter of 1996--134 MMcf, 1996--605 MMcf, 1995--500 MMcf and 1994--469 MMcf. (3) Reflects results of hedging activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Matters." (4) Calculated without giving effect to volumes of natural gas purchased for resale. 16 RISK FACTORS In addition to the other information contained in this Prospectus, the following factors should be considered carefully in evaluating an investment in the Exchange Notes offered hereby. SUBORDINATION OF NOTES AND SUBSIDIARY GUARANTIES The Outstanding Notes are and the Exchange Notes will be subordinated in right of payment to all existing and any future Senior Indebtedness of the Company. The Outstanding Notes rank and the Exchange Notes will rank pari passu with any future senior subordinated indebtedness of the Company and senior to any future junior subordinated indebtedness of the Company. Each Subsidiary Guaranty of a Subsidiary Guarantor will be subordinated in right of payment to all existing and any future Senior Indebtedness of such Subsidiary Guarantor, will rank pari passu with any future senior subordinated indebtedness of such Subsidiary Guarantor and will rank senior to any future junior subordinated indebtedness of such Subsidiary Guarantor. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, the Company would have had less than $1.0 million of Senior Indebtedness outstanding (not including $80.0 million of borrowing capacity available under the Credit Agreement, which, if borrowed, would be Senior Indebtedness), and no senior subordinated indebtedness outstanding other than the Outstanding Notes. In addition, the Indenture governing the Notes limits, but does not prohibit, the incurrence by the Company and the Subsidiary Guarantors of additional Indebtedness that is senior in right of payment to the Notes or the Subsidiary Guaranties. In the event of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding with respect to the Company or upon acceleration of the Notes due to an Event of Default, the assets of the Company will be available to pay obligations of the Notes only after all Senior Indebtedness of the Company has been paid in full in cash, and the assets of each Subsidiary Guarantor will be available to pay its Subsidiary Guaranty only after all Senior Indebtedness of such Subsidiary Guarantor has been paid in full in cash. In such circumstances, there may not be sufficient assets remaining to pay amounts due on any or all of the Notes. The holders of any Indebtedness of the Company's subsidiaries other than the Subsidiary Guarantors will be entitled to payment thereof from the assets of such subsidiaries prior to the holders of any unsecured obligations of the Company, including the Notes. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, the total indebtedness and other liabilities (including trade payables, deferred taxes and accrued liabilities, but excluding any obligations owed to affiliates) of the Company's subsidiaries that are not Subsidiary Guarantors would have been less than $0.5 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources," "Description of Certain Senior Indebtedness" and "Description of the Exchange Notes--Subordination" and "-- Subsidiary Guaranties." The Notes and the Subsidiary Guaranties are unsecured and will be effectively subordinated to any secured indebtedness of the Company or the appropriate Subsidiary Guarantor, as applicable. Each of the Initial Subsidiary Guarantors has agreed to guarantee indebtedness outstanding under the Credit Agreement, which indebtedness will constitute Senior Indebtedness. In addition, any Senior Indebtedness of the Company or any Subsidiary Guarantor (including the Credit Agreement) may be secured by all or a portion of the assets of the Company or such Subsidiary Guarantor, as appropriate. The ability of the Company to comply with the provisions of the Credit Agreement or any other Senior Indebtedness may be affected by events beyond the Company's control. The breach of any such provisions could result in a default under the Credit Agreement or any other Senior Indebtedness, in which case, depending on the actions taken by the lenders thereunder, or their successors or assignees, such lenders could elect to declare all amounts borrowed under the Credit Agreement or any other Senior Indebtedness, together with accrued interest, to be due and payable, and the Company and the Subsidiary Guarantors could be prohibited from making payments of interest and principal on the Notes until the default is cured or all Senior Indebtedness is paid or satisfied in full. In addition, such lenders could proceed against any collateral securing the payment of such indebtedness, which collateral could constitute a significant portion or all of the Company's assets. See "Description of Certain Senior Indebtedness" and "Description of the Exchange Notes--Subordination." 17 CONSEQUENCES OF A FAILURE TO EXCHANGE OUTSTANDING NOTES The Outstanding Notes have not been registered under the Securities Act or any state securities laws, and therefore, may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions, including the right of the Company and the Trustee (as defined) in certain cases to require the delivery of opinions of counsel, certifications and other information prior to any such transfer. Outstanding Notes that remain outstanding after the consummation of the Exchange Offer will continue to bear a legend reflecting such restrictions on transfer. In addition, upon consummation of the Exchange Offer, holders of Outstanding Notes that remain outstanding will not be entitled to any rights to have such Outstanding Notes registered under the Securities Act or to any similar rights under the Registration Agreement (subject to certain limited exceptions). The Company currently intends to register under the Securities Act Outstanding Notes that remain outstanding after consummation of the Exchange Offer only if such Outstanding Notes are held by Initial Purchasers or persons ineligible to participate in the Exchange Offer (other than due solely to the status of such holder as an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act). If Outstanding Notes are tendered and accepted in the Exchange Offer, the market for untendered Outstanding Notes is likely to diminish; accordingly, holders who do not tender their Outstanding Notes may encounter difficulties in selling such notes following the Exchange Offer. The Exchange Notes and any Outstanding Notes that remain outstanding after consummation of the Exchange Offer will constitute a single series of debt securities under the Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount of the Notes have taken certain actions or exercised certain rights under the Indenture. The Outstanding Notes provide that if (i) by July 21, 1997, neither an exchange offer registration statement nor a resale shelf registration statement has been filed, (ii) by September 18, 1997, neither an exchange offer registration statement has been declared effective nor a resale shelf registration statement has been filed, (iii) by October 20, 1997, neither an exchange offer has been consummated nor a resale shelf registration statement has been declared effective or (iv) either the exchange offer registration statement or the resale shelf registration statement has been declared effective and such registration statement ceases to be effective or usable (subject to certain exceptions), Special Interest (as defined) will accrue and be payable semiannually until such time as all such Registration Defaults (as defined) have been cured. Following consummation of the Exchange Offer, neither the Outstanding Notes nor the Exchange Notes will be entitled to any increase in the interest rate thereon (subject to certain limited exceptions). See "Description of the Exchange Notes" and "Description of the Outstanding Notes". LIMITATION ON PURCHASE OF NOTES UPON THE OCCURRENCE OF A CHANGE OF CONTROL Upon the occurrence of a Change of Control, the Company will be required to make an offer to purchase the Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. If a Change of Control were to occur, there can be no assurance that the Company and the Subsidiary Guarantors would have sufficient financial resources, or would be able to arrange financing, to pay the purchase price for all Notes tendered by the holders thereof. The Credit Agreement contains, and any future credit agreements or other agreements relating to indebtedness (including Senior Indebtedness or other senior subordinated indebtedness) to which the Company or a Subsidiary Guarantor becomes a party may contain, restrictions on the purchase of Notes. If a Change of Control occurs at a time when the Company and the Subsidiary Guarantors are unable to purchase the Notes (due to insufficient financial resources, contractual prohibition or otherwise), such failure to purchase tendered Notes would constitute an Event of Default under the Indenture, which would, in turn, constitute a default under the Credit Agreement and may constitute a default under the terms of any other indebtedness of the Company 18 or the Subsidiary Guarantors then outstanding. In such circumstances, the subordination provisions in the Indenture would likely prohibit payments to holders of Notes. See "Description of the Exchange Notes--Subordination" and "--Purchase at the Option of Holders Upon a Change of Control". The definition of "Change of Control" in the Indenture includes a sale, lease, conveyance or transfer of "all or substantially all" of the assets of the Company and certain of its Restricted Subsidiaries, taken as a whole, to a person or group of persons. There is little case law interpreting the phrase "all or substantially all" in the context of an indenture. Because there is no precise established definition of this phrase, the ability of a holder of the Notes to require the Company to purchase such Notes as a result of a sale, lease, conveyance or transfer of all or substantially all of the Company's assets to a person or group of persons may be uncertain. FRAUDULENT CONVEYANCE If a court in a lawsuit brought by an unpaid creditor or representative of creditors, such as a trustee in bankruptcy, or the Company as a debtor-in- possession, were to determine under relevant federal or state fraudulent conveyance statutes that the Company did not receive fair consideration or reasonably equivalent value for incurring indebtedness, including the Notes, and that, at the time of such incurrence, the Company (i) was insolvent, (ii) was rendered insolvent by reason of such incurrence, (iii) was engaged in a business or transaction for which the assets remaining with the Company constituted unreasonably small capital or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, then such court, subject to applicable statutes of limitation, could void the Company's obligations under the Notes, subordinate the Notes to other indebtedness of the Company or take other action detrimental to the holders of the Notes. The measure of insolvency for these purposes will depend upon the governing law of the relevant jurisdiction. Generally, however, a company will be considered insolvent for these purposes if the sum of that company's debts is greater than the fair value or the fair saleable value of all of that company's property or if the present fair saleable value of that company's assets is less than the amount that will be required to pay its probable liability on its existing debts as they become absolute and mature. Moreover, regardless of solvency, a court could void an incurrence of indebtedness, including the Notes, if it determined that such transaction was made with the intent to hinder, delay or defraud creditors. In addition, a court could subordinate indebtedness, including the Notes, to the claims of all existing and future creditors on similar grounds. The Company believes that, after giving effect to the Offering, the Company was (i) neither insolvent nor rendered insolvent by the incurrence of indebtedness in connection with the Offering, (ii) in possession of sufficient capital to run its business effectively and (iii) incurring debts within its ability to pay as the same mature or become due. In addition, the Subsidiary Guaranties may be subject to review under relevant federal and state fraudulent conveyance and similar statutes in a bankruptcy or reorganization case or a lawsuit brought by or on behalf of creditors of the Subsidiary Guarantors. In such a case, the analysis set forth above would generally apply, except that the Subsidiary Guaranties could also be subject to the claim that, since the Subsidiary Guaranties were incurred for the benefit of the Company (and only indirectly for the benefit of the Subsidiary Guarantors), the obligations of the Subsidiary Guarantors thereunder were incurred for less than fair consideration or reasonably equivalent value. A court could void the Subsidiary Guarantors' obligations under the Subsidiary Guaranties, subordinate the Subsidiary Guaranties to other indebtedness of the Subsidiary Guarantors or take other action detrimental to the holders of the Notes. See "Description of Certain Senior Indebtedness" and "Description of the Exchange Notes." VOLATILITY OF OIL AND GAS PRICES The Company's financial condition, results of operations and future growth and the carrying value of its proved reserves are substantially dependent upon the price of, and demand for, oil and gas. 19 Historically, the markets for oil and gas have been volatile, and such markets are likely to continue to be volatile in the future. Prices for oil and gas are subject to wide fluctuations in response to relatively minor changes in the supply of and demand for oil and gas, market uncertainty and a variety of additional factors beyond the Company's control. These factors include the level of consumer product demand, weather conditions, domestic and foreign governmental regulations, the price and availability of alternative fuels, the availability of pipeline capacity, political conditions in the Middle East, domestic and foreign supplies of oil and gas, the price and level of foreign imports and overall economic conditions. It is impossible to predict future oil and gas price movements with any certainty. Any significant and extended decline in the price of oil or gas would adversely affect the Company's financial condition and results of operations, and could result in a reduction in the carrying value of the Company's proved reserves and adversely affect its access to capital. See "--Uncertainty of Estimates of Reserves and Future Net Revenues" and "--Property Impairment Charges." REPLACEMENT AND EXPANSION OF RESERVES The Company's financial condition and results of operations depend substantially upon its ability to acquire or find and successfully develop additional oil and gas reserves. The proved reserves of the Company will generally decline as its reserves are produced, except to the extent that the Company acquires properties containing proved reserves or conducts successful development, exploitation or exploration activities. At December 31, 1996, the Company's proved reserves were comprised of approximately 90% proved developed reserves, and the Company does not have a large inventory of development drilling locations or enhanced recovery projects to pursue after 1997. If the Company is unable to economically acquire or find significant new reserves for development and exploitation, the Company's oil and gas production, and thus its revenue, would likely decline gradually as its reserves are produced. UNCERTAINTY OF ESTIMATES OF RESERVES AND FUTURE NET REVENUES There are numerous uncertainties inherent in estimating oil and gas reserves and their values, including many factors beyond the Company's control. The reserve information set forth in this Prospectus represents estimates only. Although the Company believes such estimates to be reasonable, reserve estimates are imprecise and should be expected to change as additional information becomes available. Estimates of oil and gas reserves, by necessity, are projections based on engineering data, and there are uncertainties inherent in the interpretation of such data as well as the projection of future rates of production and the timing of development expenditures. Reserve engineering is a subjective process of estimating underground accumulations of oil and gas that are difficult to measure. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment. As a result, estimates of different engineers, including those used by the Company, may vary. Estimates of economically recoverable oil and gas reserves and of future net revenues necessarily depend upon a number of factors and assumptions, such as historical production from the area compared with production from other producing areas, the assumed effects of regulations by governmental agencies and assumptions concerning future oil and gas prices, operating costs, severance and excise taxes, development costs and workover and remedial costs, all of which may in fact vary considerably from actual results. Any significant variance in the assumptions could materially affect estimates of economically recoverable quantities of oil and gas attributable to any particular group of properties, classifications of such reserves based on risk of recovery and estimates of the future net revenues expected therefrom. Moreover, there can be no assurance that the Company's reserves will ultimately be produced or that its proved undeveloped reserves will be developed within the periods anticipated. Actual production, revenues and expenditures with respect to the Company's reserves will likely vary from estimates, and such variances may be material. 20 The Present Values referred to in this Prospectus should not be construed as the current market value of the proved reserves attributable to the Company's oil and gas properties. In accordance with applicable SEC requirements, proved reserves and the future net revenues from which Present Value is derived are estimated using prices and costs at the date of the estimate held constant (except to the extent a contract specifically provides otherwise). Actual future prices and costs may differ materially. The estimates at December 31, 1996 of the Company's proved reserves and the future net revenues from which Present Value is derived were made using weighted average sales prices of $24.63 per Bbl of oil and $3.45 per Mcf of natural gas at that date, which prices were substantially higher than the prices used in previous years to make such estimates and substantially higher than oil and gas prices at May 30, 1997. The closing price on the New York Mercantile Exchange ("NYMEX") for the prompt month futures contract for delivery of West Texas Intermediate Crude Oil on December 31, 1996 and May 30, 1997 was $25.92 and $20.88 per Bbl, respectively. The closing price on the NYMEX for the prompt month futures contract for natural gas delivered at Henry Hub, Louisiana on December 31, 1996 and May 30, 1997 was $2.76 and $2.23 per MMBtu, respectively. For additional information regarding the effect of prices on proved reserves, estimated future net revenues and Present Values, see "Business and Properties--Oil and Gas Reserves." In addition, actual future net revenues from proved reserves will be affected by factors such as the amount and timing of actual production and the incurrence of expenses, supply and demand for oil and gas, curtailments or increases in consumption by gas purchasers and changes in governmental regulations or taxation. Furthermore, the 10% discount factor that the SEC requires the Company to use in calculating Present Values is not necessarily the most appropriate discount factor based on interest rates in effect from time to time and risks associated with the Company's reserves or the oil and gas industry in general. PROPERTY IMPAIRMENT CHARGES During 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires the Company to assess the need for an impairment of capitalized costs of oil and gas properties on a property-by-property (rather than a company-wide) basis. Applying SFAS No. 121, the Company recognized non-cash property impairment charges of $12.1 million in 1996 and $4.9 million in 1995. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Results of Operations." Significant declines in oil or gas prices or downward revisions of reserve estimates could adversely impact the Company's estimates of future net revenues from its proved reserves and consequently could result in future non-cash impairment charges against the Company's income. IMPACT ON NET INCOME OF MARKETABLE SECURITY SALES GAINS The Company's net income during the three-year period ended December 31, 1996 and the quarter ended March 31, 1997 was positively impacted by its sales of marketable securities. The Company recognized pretax gains from such sales of $13.0 million in 1996, $13.1 million in 1995, $7.5 million in 1994 and $1.8 million in the first quarter of 1997. In the absence of such gains, the Company would have reported net losses in 1996 and 1995, and its net income in 1994 and the first quarter of 1997 would have been reduced. The Company plans to liquidate the remainder of its marketable securities (valued at $5.7 million at March 31, 1997) in 1997. Accordingly, the positive impact that sales of marketable securities have had on the Company's net income is not expected to continue beyond 1997. ACQUISITION RISKS The Company expects to continue to evaluate and pursue acquisition opportunities. The successful acquisition of producing properties requires an assessment of recoverable reserves, future oil and gas prices, operating costs, potential environmental and other liabilities and other factors 21 beyond the Company's control. This assessment is necessarily inexact and its accuracy is inherently uncertain. In connection with such an assessment, the Company performs a review it believes to be generally consistent with industry practices. This review, however, will not reveal all existing or potential problems, nor will it permit the Company to become sufficiently familiar with the properties to assess fully their deficiencies and capabilities. Inspections generally are not performed on every well, and structural and environmental problems are not necessarily observable even when an inspection is undertaken. Even when problems are identified, the seller may not be willing or financially able to give contractual protection against such problems, and the Company may decide to assume environmental and other liabilities in connection with acquired properties. There can be no assurance that the Company's acquisitions will be successful. Any unsuccessful acquisition could have a material adverse effect on the Company's financial condition and results of operations. DRILLING AND OPERATING RISKS Drilling activities are subject to many risks, including the risk that no commercially productive oil or gas reservoirs will be encountered. There can be no assurance that new wells drilled by the Company will be productive or that the Company will recover all or any portion of its investment. Drilling for oil and gas may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. The cost of drilling, completing and operating wells is often uncertain. The Company's drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, many of which are beyond its control, including economic conditions, mechanical problems, pressure or irregularities in formations, title problems, weather conditions, compliance with governmental requirements and shortages in or delays in the delivery of equipment and services. Such equipment shortages and delays sometimes involve drilling rigs, especially in Canada, where weather conditions result in a short drilling season, causing a high demand for rigs by a large number of companies during a relatively short period of time. The Company's future drilling activities may not be successful. Lack of drilling success could have a material adverse effect on the Company's financial condition and results of operations. In addition to the substantial risk that wells drilled will not be productive, hazards such as unusual or unexpected geologic formations, pressures, downhole fires, mechanical failures, blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids, pollution and other environmental risks are inherent in oil and gas development, exploitation, exploration, production and gathering. These hazards could result in substantial losses to the Company due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. The Company carries insurance that it believes is in accordance with customary industry practices, but, as is common in the oil and gas industry, the Company does not fully insure against all risks associated with its business either because such insurance is not available or because the cost thereof is considered prohibitive. The occurrence of an event that is not covered, or not fully covered, by insurance could have a material adverse effect on the Company's financial condition and results of operations. See "Business and Properties-- Drilling and Operating Risks." RISK OF HEDGING ACTIVITIES In order to reduce its exposure to price risks in the sale of its oil, natural gas and NGLs, the Company has entered into and may in the future enter into hedging contracts. The Company's hedging contracts apply to only a portion of its production and provide only limited price protection against fluctuations in the oil and gas markets. If the Company's reserves are not produced at rates equivalent to the hedged position, the Company would be required to satisfy its obligations under its hedging contracts on potentially unfavorable terms without the ability to hedge that risk through sales of comparable quantities of its own production. Further, the terms under which the Company enters into hedging contracts are based on assumptions and estimates of numerous factors such as cost of 22 production and pipeline and other transportation costs to delivery points. Substantial variations between the assumptions and estimates used by the Company and actual results experienced could materially adversely affect the Company's anticipated profit margins and its ability to manage the risks associated with fluctuations in oil and gas prices. Additionally, to the extent that the Company enters into hedging contracts, it may be prevented from realizing the benefits of price increases above the level of the hedges. Such hedging contracts are also subject to the risk that the other party may prove unable or unwilling to perform its obligations under such contracts. Any significant nonperformance could have a material adverse effect on the Company's financial condition and results of operations. Adjustments to oil and gas sales from the Company's hedging activities resulted in a reduction in the Company's revenues of $6.9 million and $1.0 million, respectively, for the year ended December 31, 1996 and the quarter ended March 31, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Matters." COMPETITION The Company operates in the highly competitive areas of oil and gas acquisition, development, exploitation, exploration, production and gathering. In seeking to acquire desirable producing properties or new leases for future exploration and in marketing and transporting its oil and gas production, the Company faces intense competition from both major and independent oil and gas companies, many of which have substantially larger financial resources, staffs and facilities than the Company. See "Business and Properties--Competition." SUBSTANTIAL CAPITAL REQUIREMENTS The Company makes, and will continue to make, substantial capital expenditures for the acquisition, development, exploitation and production of, and the exploration for, oil and gas reserves. The Company's capital expenditures for oil and gas activities, including property acquisitions, were approximately $46.2 million in 1996. The Company anticipates that such expenditures, excluding any property acquisitions, will total approximately $44.3 million in 1997. The Company intends to finance such capital expenditures with funds provided by internally generated cash flows, including the sale of its remaining marketable securities. If the Company's internally generated cash flows are less than anticipated or its capital needs are greater than anticipated, the Company may borrow funds under the Credit Agreement or seek additional equity or debt financing. The Credit Agreement limits the amount of consolidated senior funded debt (defined in the Credit Agreement to exclude the Notes but include indebtedness under the Credit Agreement and other indebtedness for borrowed money and similar obligations) that the Company may borrow to the borrowing base in effect from time to time under the Credit Agreement, as determined by the banks that are parties thereto. Various factors (including declines in the price of oil or gas) could result in a reduction of the Company's borrowing base under the Credit Agreement. If the Company's consolidated senior funded debt exceeds the amount of the reduced borrowing base, the Company would be required to make principal payments under the Credit Agreement to bring the total amount of consolidated senior funded debt outstanding in compliance with the revised borrowing base. No assurance can be given that the Company will not be required to make such mandatory prepayments in the future. See "-- Uncertainty of Estimates of Reserves and Future Net Revenues" and "Description of Certain Senior Indebtedness." If the Company's cash flow from operations and the availability under the Credit Agreement are not sufficient to satisfy its cash requirements, there can be no assurance that additional equity or debt financing will be available to meet such requirements. Even if such alternative financing is available, there can be no assurance that the terms of such financing will be acceptable to the Company. If acceptable financing is not available, any future property acquisitions and the Company's development, exploitation and exploration activities may be curtailed. 23 In the last several years, the Company has funded a significant portion of its capital expenditures by liquidating portions of its portfolio of marketable securities. It expects to liquidate the remainder of its marketable securities during 1997. Accordingly, this source of funds is not expected to be available after 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--General." INTERNATIONAL OPERATIONS The Company's Canadian operations represented approximately 15% of its total proved reserves at December 31, 1996 and approximately 20% of its total revenues for the year ended December 31, 1996, and are expected to represent a significant portion of its operations in the future. The Company continues to evaluate other international investment opportunities and has allocated approximately $800,000 of its 1997 capital expenditures budget for this purpose, but currently has no binding agreements or commitments to conduct any material international oil and gas exploration or development activities other than in Canada. The Company's Canadian operations, and any other international operations that the Company may conduct in the future, may be adversely affected by local political and economic developments, exchange controls, foreign currency fluctuations, export duties and quotas, domestic and international customs and tariffs, changing taxation policies and other governmental regulations. In addition, the Company receives a substantial portion of its revenue in Canadian dollars. As a result, fluctuations in the exchange rate of the Canadian dollar with respect to the U.S. dollar could have an adverse effect on the Company's financial position, results of operations and cash flows. MARKETABILITY OF PRODUCTION The marketability of the Company's natural gas production depends in part upon the availability, proximity and capacity of natural gas gathering systems, pipelines and processing facilities. Most of the Company's natural gas is delivered through gas gathering systems and gas pipelines that are not owned by the Company. Federal, state, provincial and local regulation of oil and gas production and transportation, tax and energy policies, changes in supply and demand and general economic conditions all could adversely affect the Company's ability to produce and market its oil and gas. Any dramatic change in market factors could have a material adverse effect on the Company's financial condition and results of operations. See "Business and Properties-- Marketing of Production" and "--Governmental Regulation." COMPLIANCE WITH ENVIRONMENTAL AND OTHER GOVERNMENTAL REGULATIONS The Company's business is subject to federal, state, provincial and local laws and regulations relating to the development, exploitation, production and gathering of, and the exploration for, oil and gas, including those relating to the protection of the environment. Although the Company believes it is in substantial compliance with all applicable laws and regulations, the implementation of new, or the modification of existing, laws or regulations could have a material adverse effect on the Company's financial condition and results of operations. In addition, the discharge of oil, gas or other pollutants, or wastes or hazardous or toxic substances, into the air, soil or water may give rise to significant liabilities on the part of the Company to the government and third parties, and may require the Company to incur substantial costs of remediation. No assurance can be given that existing environmental and other governmental laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations will not materially adversely affect the Company's financial condition and results of operations. See "Business and Properties--Governmental Regulation" and "-- Environmental Matters." DEPENDENCE ON KEY PERSONNEL The Company depends, and will continue to depend in the foreseeable future, on the services of its officers and key employees with extensive experience and expertise in evaluating and analyzing 24 producing oil and gas properties and drilling prospects, maximizing production from oil and gas properties (including through enhanced recovery methods) and marketing oil and gas production. The ability of the Company to retain such officers and key employees is important to the continued success and growth of the Company. The loss of key personnel could have a material adverse effect on the Company. The Company does not maintain key man life insurance on any of its officers or employees. See "Management." LACK OF PUBLIC MARKET The Outstanding Notes were issued to, and the Company believes are currently owned by, a relatively small number of beneficial owners. The Outstanding Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for Exchange Notes. See "-- Consequences of a Failure to Exchange Outstanding Notes." Although the Exchange Notes will generally be permitted to be resold or otherwise transferred by holders thereof (who are not affiliates of the Company) without compliance with the registration and prospectus delivery requirements of the Securities Act, they will constitute a new issue of securities with no established trading market. The Company has been advised by the Initial Purchasers that the Initial Purchasers presently intend to make a market in the Exchange Notes. However, the Initial Purchasers are not obligated to do so, and any market-making activity with respect to the Exchange Notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and may be limited during the Exchange Offer. If the Exchange Notes are traded after their initial issuance, they may trade at a discount from face value and at a discount from the initial offering price of the Outstanding Notes, depending upon prevailing interest rates, the market for similar securities and other factors including general economic conditions and the financial condition of the Company. The Company does not intend to apply for a listing or quotation of the Exchange Notes on any securities exchange or stock market. Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. The liquidity of, and trading market for, the Exchange Notes also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for, the Company. Historically, the market for noninvestment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. There can be no assurance that the market, if any, for the Notes will not be subject to similar disruptions. Any such disruptions may have an adverse effect on the holders of the Notes. Notwithstanding the registration of the Exchange Notes in the Exchange Offer, holders who are "affiliates" (as defined in Rule 405 under the Securities Act) of the Company may publicly offer for sale or resell the Exchange Notes only in compliance with the provisions of Rule 144 under the Securities Act. Each broker-dealer that receives Exchange Notes for its own account in exchange for Outstanding Notes, where such Outstanding Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "The Exchange Offer--Resales of Exchange Notes." EXCHANGE OFFER PROCEDURES Issuance of the Exchange Notes in exchange for the Outstanding Notes pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of the required documents. Therefore, holders of the Outstanding Notes desiring to tender such Outstanding Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to tenders of Outstanding Notes for exchange. 25 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS This Prospectus includes "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements other than statements of historical facts included in this Prospectus, including without limitation statements under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business and Properties," regarding proved reserves, estimated future net revenues, Present Values, planned capital expenditures (including the amount and nature thereof), increases in oil and gas production, the number of wells anticipated to be drilled in 1997 and thereafter and the Company's financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequences to or effects on its business or operations. Among the factors that could cause actual results to differ materially from the Company's expectations are general economic conditions, competition, domestic and foreign government regulations, fluctuations in oil and gas prices and the other factors set forth in "Risk Factors." All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by such factors. The Company assumes no obligation to update any such forward-looking statements. 26 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER In connection with the sale of the Outstanding Notes, the Company and the Initial Subsidiary Guarantors entered into the Registration Agreement with the Initial Purchasers, pursuant to which the Company and the Initial Subsidiary Guarantors agreed to file and to use their reasonable best efforts (subject to certain exceptions) to cause to become effective with the SEC a registration statement with respect to the exchange of the Outstanding Notes for debt securities with terms identical in all material respects to the terms of the Outstanding Notes. A copy of the Registration Agreement has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The Exchange Offer is being made to satisfy the contractual obligations of the Company and the Initial Subsidiary Guarantors under the Registration Agreement. The form and terms of the Exchange Notes are the same as the form and terms of the Outstanding Notes except that: (i) the Exchange Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Outstanding Notes and will not be entitled to resale registration under the Registration Agreement (subject to certain limited exceptions), although the Registration Agreement does provide for prospectus delivery procedures to assist resales of Exchange Notes; and (ii) the Exchange Notes will not provide for any increase in the interest rate thereon (subject to certain limited exceptions). In that regard, the Outstanding Notes provide that if (i) by July 21, 1997, neither an exchange offer registration statement nor a resale shelf registration statement has been filed, (ii) by September 18, 1997, neither an exchange offer registration statement has been declared effective nor a resale shelf registration statement has been filed, (iii) by October 20, 1997, neither an exchange offer has been consummated nor a resale shelf registration statement has been declared effective or (iv) either the exchange offer registration statement or the resale shelf registration statement has been declared effective and such registration statement ceases to be effective or usable (subject to certain exceptions), Special Interest will accrue and be payable semiannually until such time as all such Registration Defaults have been cured. See "Risk Factors--Consequences of a Failure to Exchange Outstanding Notes" and "Description of the Outstanding Notes." The Exchange Offer is not being made to, nor will the Company accept tenders for exchange from, holders of Outstanding Notes in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Unless the context requires otherwise, the term "holder" with respect to the Exchange Offer means any person in whose name the Outstanding Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder, or any person whose Outstanding Notes are held of record by The Depository Trust Company (the "Depository") who desires to deliver such Outstanding Notes by book-entry transfer at the Depository. TERMS OF THE EXCHANGE OFFER The Company hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, to exchange up to $125,000,000 aggregate principal amount of Exchange Notes for a like aggregate principal amount of Outstanding Notes properly tendered on or prior to the Expiration Date and not properly withdrawn in accordance with the procedures described below. The Company will issue, promptly after the Expiration Date, an aggregate principal amount of up to $125,000,000 of Exchange Notes in exchange for a like aggregate principal amount of Outstanding Notes tendered and accepted in connection with the Exchange Offer. The term "Expiration Date" means 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). Holders may tender their 27 Outstanding Notes in whole or in part in a principal amount of $1,000 and integral multiples thereof. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Outstanding Notes being tendered or accepted for exchange. As of the date of this Prospectus, $125,000,000 aggregate principal amount of Outstanding Notes is outstanding. Holders of Outstanding Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. Outstanding Notes that are not tendered for exchange or are tendered but not accepted in connection with the Exchange Offer will remain outstanding and be entitled to the benefits of the Indenture, but will not be entitled to any further registration rights under the Registration Agreement, except under limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange Outstanding Notes," "Description of the Exchange Notes--Registration Agreement" and "Description of the Outstanding Notes." If any tendered Outstanding Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Outstanding Notes will be returned, without expense, to the tendering holder thereof promptly after the Expiration Date. Holders who tender Outstanding Notes in connection with the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Outstanding Notes in connection with the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses" and "--Transfer Taxes." NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY RECOMMENDATION TO HOLDERS OF OUTSTANDING NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OUTSTANDING NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OUTSTANDING NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OUTSTANDING NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. EXTENSIONS AND AMENDMENTS The Company expressly reserves the right in its sole and absolute discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Outstanding Notes for exchange, (ii) to terminate the Exchange Offer (whether or not any Outstanding Notes have theretofore been accepted for exchange) if the Company determines, in its sole and absolute discretion, that any of the events or conditions referred to under "--Conditions to the Exchange Offer" have occurred or exist or have not been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain all Outstanding Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Outstanding Notes to withdraw their tendered Outstanding Notes as described under "--Withdrawal Rights," and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, or if the Company waives a material condition of the Exchange Offer, the Company will promptly disclose such amendment or waiver by means of a prospectus supplement that will be distributed to the registered holders of the Outstanding Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. Any such delay in acceptance, termination, extension or amendment will be followed promptly by oral or written notice thereof to the Exchange Agent and by making a public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York 28 City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement and subject to applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency. ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF EXCHANGE NOTES Upon the terms and subject to the conditions of the Exchange Offer, the Company will exchange, and will issue to the Exchange Agent, Exchange Notes for Outstanding Notes validly tendered and not withdrawn (pursuant to the withdrawal rights described under "--Withdrawal Rights") promptly after the Expiration Date. In all cases, delivery of Exchange Notes in exchange for Outstanding Notes tendered and accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (i) certificates for such Outstanding Notes or a timely confirmation of a book- entry transfer (a "Book-Entry Confirmation") of such Outstanding Notes, if such procedure is available, into the Exchange Agent's account at the Depository's book-entry transfer facility system (the "Book-Entry Transfer Facility"), (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering Outstanding Notes which are the subject of such Book-Entry Confirmation that such participant has received and agrees to be bound by the terms of the Letter of Transmittal, and that the Company may enforce such agreement against the participant. Subject to the terms and conditions of the Exchange Offer, the Company will be deemed to have accepted for exchange, and thereby exchanged, Outstanding Notes validly tendered and not withdrawn as, if and when the Company gives oral or written notice to the Exchange Agent of the Company's acceptance of such Outstanding Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent for the Company for the purpose of receiving tenders of Outstanding Notes, Letters of Transmittal and related documents, and as agent for tendering holders for the purpose of receiving Outstanding Notes, Letters of Transmittal and related documents and transmitting Exchange Notes to validly tendering holders. Such exchange will be made promptly after the Expiration Date. If for any reason whatsoever, acceptance for exchange or the exchange of any Outstanding Notes tendered pursuant to the Exchange Offer is delayed (whether before or after the Company's acceptance for exchange of Outstanding Notes) or the Company extends the Exchange Offer or is unable to accept for exchange or exchange Outstanding Notes tendered pursuant to the Exchange Offer, then, without prejudice to the Company's rights set forth herein, the Exchange Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Outstanding Notes and such Outstanding Notes may not be withdrawn except to the extent tendering holders are entitled to withdrawal rights as described under "-- Withdrawal Rights." A holder of Outstanding Notes will warrant and agree in the Letter of Transmittal that it has full power and authority to tender, exchange, sell, assign and transfer Outstanding Notes, that the Company will acquire good, marketable and unencumbered title to the tendered Outstanding Notes, free and clear of all liens, restrictions, charges and encumbrances, and that the Outstanding Notes tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment and transfer of the Outstanding Notes tendered pursuant to the Exchange Offer. PROCEDURES FOR TENDERING OUTSTANDING NOTES Valid Tender Except as set forth below, in order for Outstanding Notes to be validly tendered pursuant to the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal (or facsimile thereof), 29 with any required signature guarantees, and mail or otherwise deliver such Letter of Transmittal or such facsimile, or an Agent's Message, and any other required documents, to the Exchange Agent so that such documents are received by the Exchange Agent prior to the Expiration Date. In addition, either (i) the certificates for such Outstanding Notes must be received by the Exchange Agent along with the Letter of Transmittal or (ii) a Book-Entry Confirmation of such Outstanding Notes into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the procedures for book-entry transfer set forth below, if available, must be received by the Exchange Agent prior to the Expiration Date or (iii) the holder must comply with the guaranteed delivery procedures set forth below. Delivery of all documents must be made to the Exchange Agent at its address set forth herein. Holders may also request that their respective brokers, dealers, commercial banks, trust companies or nominees effect such tender for such holders. If less than all of the Outstanding Notes are tendered, a tendering holder should fill in the amount of Outstanding Notes being tendered in the appropriate box on the Letter of Transmittal. The entire amount of Outstanding Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Book Entry Transfer The Exchange Agent will establish an account with respect to the Outstanding Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any financial institution that is a participant in the Book-Entry Transfer Facility may make a book-entry delivery of the Outstanding Notes by causing the Depository to transfer such Outstanding Notes into the Exchange Agent's account at the Book- Entry Transfer Facility in accordance with the Depository's procedures for transfers. Although delivery of Outstanding Notes may be effected through book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an Agent's Message must in any case be transmitted to and received by the Exchange Agent at one of the Exchange Agent's addresses set forth under "--Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery procedures set forth below must be complied with. DELIVERY OF DOCUMENTS TO THE DEPOSITORY IN ACCORDANCE WITH THE DEPOSITORY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. THE LETTER OF TRANSMITTAL OR AN AGENT'S MESSAGE MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO , 1997. Signature Guarantees Certificates for the Outstanding Notes need not be endorsed and signature guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate for the Outstanding Notes is registered in a name other than that of the person surrendering the certificate or (b) such registered holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the Letter of Transmittal. In the case of (a) or (b) above, such certificates for Outstanding Notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the Letter of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor" institution, including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or 30 government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of such Eligible Institution. See Instruction 1 to the Letter of Transmittal. Guaranteed Delivery If a holder desires to tender Outstanding Notes pursuant to the Exchange Offer and the certificates for such Outstanding Notes are not immediately available or time will not permit the Letter of Transmittal to reach the Exchange Agent on or before the Expiration Date, or if a holder cannot complete the procedures for book-entry transfer and deliver an Agent's Message on a timely basis, such Outstanding Notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the Letter of Transmittal, is received by the Exchange Agent, as provided below, on or prior to the Expiration Date; and (iii) the certificates (or a Book-Entry Confirmation) representing all tendered Outstanding Notes, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal, are received by the Exchange Agent within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or mail, to the Exchange Agent and must include a guarantee by an Eligible Institution in the form set forth in such notice. Notwithstanding any other provision hereof, the delivery of Exchange Notes in exchange for Outstanding Notes tendered and accepted for exchange pursuant to the Exchange Offer will in all cases be made only after timely receipt by the Exchange Agent of Outstanding Notes, or of a Book-Entry Confirmation with respect to such Outstanding Notes, and a properly completed and duly executed Letter of Transmittal (or facsimile thereof) or an Agent's Message. Accordingly, the delivery of Exchange Notes might not be made to all tendering holders at the same time, and will depend upon when Outstanding Notes, Book- Entry Confirmations with respect to Outstanding Notes and other required documents are received by the Exchange Agent. The Company's acceptance for exchange of Outstanding Notes tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions of the Exchange Offer. Determination of Validity All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tendered Outstanding Notes and the validity and form of any other required documents will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. The Company reserves the absolute right, in its sole and absolute discretion, to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company, be unlawful. No tender of Outstanding Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer as set forth under "--Conditions to the Exchange Offer" or any condition or irregularity in any tender of Outstanding Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. 31 A beneficial owner of Outstanding Notes that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact such entity promptly if such beneficial owner wishes to participate in the Exchange Offer. If such beneficial owner wishes to tender directly, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering its Outstanding Notes, either make appropriate arrangements to register ownership of the Outstanding Notes in such holder's name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time. If the Letter of Transmittal is signed by the record holder(s) of the Outstanding Notes tendered thereby, the signature must correspond with the name(s) written on the face of the Outstanding Notes without alteration, enlargement or any change whatsoever. If any Letter of Transmittal, endorsement, bond power, power of attorney or any other document required by the Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company, in its sole discretion, of such person's authority to so act must be submitted. RESALES OF EXCHANGE NOTES The Company is making the Exchange Offer in reliance on a position of the staff of the Division of Corporation Finance of the SEC as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the SEC would make a determination with respect to the Exchange Offer similar to that made in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such Exchange Notes. However, any holder of Outstanding Notes who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or who intends to participate in the Exchange Offer for the purpose of distributing Exchange Notes, or any broker-dealer who purchased Outstanding Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the SEC set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Outstanding Notes unless such sale is made pursuant to an exemption from such requirements. In the event that applicable interpretations by the staff of the Division of Corporation Finance of the SEC change or otherwise do not permit resales of the Exchange Notes without compliance with the registration and prospectus delivery requirements of the Securities Act, holders of Exchange Notes who transfer Exchange Notes in violation of the prospectus delivery provisions of the Securities Act or without an exemption from registration thereunder may incur liability thereunder. Each holder of Outstanding Notes who wishes to exchange Outstanding Notes for Exchange Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any Exchange Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such Exchange Notes and (iv) if such holder is not a broker-dealer, 32 such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such Exchange Notes. Each Participating Broker-Dealer must acknowledge that it acquired the Outstanding Notes for its own account as a result of market-making activities or other trading activities and that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the SEC in the interpretive letters referred to above, the Company believes that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes received upon exchange of such Outstanding Notes (other than Outstanding Notes which represent an unsold allotment from the original sale of the Outstanding Notes) with a prospectus meeting the requirements of the Securities Act, that may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such Exchange Notes. Accordingly, this Prospectus may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making activities or other trading activities. Subject to certain provisions set forth in the Registration Agreement, the Company has agreed that, for a period of up to 90 days after the consummation of the Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. Any Participating Broker-Dealer who is an "affiliate" of the Company may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "Plan of Distribution." Each Participating Broker-Dealer who surrenders Outstanding Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Agreement, such Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company has given notice that the sale of the Exchange Notes may be resumed, as the case may be. WITHDRAWAL RIGHTS Except as otherwise provided herein, tenders of Outstanding Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth under "-- Exchange Agent" on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Outstanding Notes to be withdrawn, the aggregate principal amount of Outstanding Notes to be withdrawn, and (if certificates for such Outstanding Notes have been tendered) the name of the registered holder of the Outstanding Notes as set forth on the Outstanding Notes, if different from that of the person who tendered such Outstanding Notes. If Outstanding Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Outstanding Notes, the tendering holder must submit the serial numbers shown on the particular Outstanding Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Outstanding Notes tendered for the account of an Eligible Institution. If Outstanding Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "-- Procedures for 33 Tendering Outstanding Notes," the notice of withdrawal must specify the name and number of the account at the Depository to be credited with the withdrawal of Outstanding Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Outstanding Notes may not be rescinded. Outstanding Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described above under "-- Procedures for Tendering Outstanding Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Outstanding Notes which have been tendered but which are withdrawn will be returned to the holder thereof promptly after withdrawal. INTEREST ON THE EXCHANGE NOTES Each Exchange Note will bear interest at the rate of 9 1/2% per annum from the most recent date to which interest has been paid or duly provided for on the Outstanding Note surrendered in exchange for such Exchange Note or, if no interest has been paid or duly provided for on such Outstanding Note, from May 21, 1997 (the date of original issuance of the Outstanding Notes). Interest on the Exchange Notes will be payable semiannually on May 15 and November 15 of each year, commencing on November 15, 1997. Holders of Outstanding Notes whose Outstanding Notes are accepted for exchange will not receive accrued interest on such Outstanding Notes for any period from and after the last interest payment date to which interest has been paid or duly provided for on such Outstanding Notes prior to the original issue date of the Exchange Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Outstanding Notes, and will be deemed to have waived the right to receive any interest on such Outstanding Notes accrued from and after such interest payment date or, if no such interest has been paid or duly provided for, from and after May 21, 1997. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provisions of the Exchange Offer, or any extension of the Exchange Offer, the Company will not be required to accept for exchange, or to exchange, any Outstanding Notes for any Exchange Notes, and, as described below, may terminate the Exchange Offer (whether or not any Outstanding Notes have theretofore been accepted for exchange), or may waive any conditions to or amend the Exchange Offer, if any of the following conditions have occurred or exist or have not been satisfied: (a) there shall occur a change in the current interpretation by the staff of the SEC which permits the Exchange Notes issued pursuant to the Exchange Offer in exchange for Outstanding Notes to be offered for resale, resold and otherwise transferred by holders thereof (other than broker-dealers and any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such Exchange Notes; or 34 (b) any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the Exchange Offer which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; or (c) any law, statute, rule or regulation shall have been adopted or enacted which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; or (d) a banking moratorium shall have been declared by United States federal authorities that, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; or (e) trading on the New York Stock Exchange or generally in the United States over-the-counter market shall have been suspended by order of the SEC or any other governmental authority which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; or (f) a stop order shall have been issued by the SEC suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Company, threatened for that purpose; or (g) any governmental approval has not been obtained, which approval the Company shall, in its sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby; or (h) any change, or any development involving a prospective change, in the business or financial affairs of the Company or any of its subsidiaries has occurred that, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer. If the Company determines in its sole and absolute discretion that any of the foregoing events or conditions has occurred or exists or has not been satisfied, the Company may, subject to applicable law, terminate the Exchange Offer (whether or not any Outstanding Notes have theretofore been accepted for exchange) or may waive any such condition or otherwise amend the terms of the Exchange Offer in any respect. If such waiver or amendment constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver or amendment by means of a prospectus supplement that will be distributed to the registered holders of the Outstanding Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. 35 EXCHANGE AGENT Texas Commerce Bank National Association (the "Exchange Agent") has been appointed as Exchange Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any other required documents, questions, requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent as follows: By Mail: By Overnight Courier: Texas Commerce Bank National Association Texas Commerce Bank National Association Attn: Frank Ivins--Personal and Attn: Frank Ivins--Personal and Confidential Confidential P.O. Box 2320 1201 Main Street, One Main Place Dallas, Texas 75221-2320 18th Floor Dallas, Texas 75202 By Hand: By Facsimile Transmission: Texas Commerce Bank National Association (for Eligible Institutions Only) Attn: Frank Ivins--Personal and Texas Commerce Bank National Association Confidential 1201 Main Street, One Main Place Attn: Frank Ivins--Personal and Confidential 18th Floor (214) 672-5746 Dallas, Texas 75202 Confirm by Telephone: (214) 672-5678
Delivery to other than the above addresses or facsimile number will not constitute a valid delivery. FEES AND EXPENSES The Company has agreed to pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. TRANSFER TAXES Holders who tender their Outstanding Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Outstanding Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Outstanding Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The exchange of the Outstanding Notes for Exchange Notes by tendering holders should not be a taxable exchange for U.S. federal income tax purposes, and such holders should not recognize any taxable gain or loss for U.S. federal income tax purposes as a result of such exchange. Holders of Exchange Notes will continue to be required to include interest received on the Exchange Notes in gross income in accordance with their method of accounting for U.S. federal income tax purposes. Holders should review the information set forth under "Certain Federal Income Tax Considerations" for a discussion of certain U.S. tax considerations relating to the Exchange Notes prior to tendering the Outstanding Notes in the Exchange Offer. 36 USE OF PROCEEDS The Exchange Offer is intended to satisfy certain of the Company's and the Initial Subsidiary Guarantors' obligations under the Registration Agreement. The Company will not receive any cash proceeds from the issuance of the Exchange Notes in the Exchange Offer. In consideration for issuing the Exchange Notes as contemplated in this Prospectus, the Company will receive Outstanding Notes in like principal amount. The form and terms of the Exchange Notes are identical in all material respects to the form and terms of the Outstanding Notes, except for certain transfer restrictions and registration rights relating to the Outstanding Notes and except for certain provisions providing for an increase in the interest rate on the Outstanding Notes under certain circumstances relating to the timing of the Exchange Offer. See "Description of the Exchange Notes." The Outstanding Notes surrendered in exchange for the Exchange Notes will be retired and cancelled and cannot be reissued. Accordingly, issuance of the Exchange Notes will not result in any increase in the outstanding debt of the Company. The net proceeds to the Company from the sale of the Outstanding Notes were approximately $119.9 million, after deducting the discount received by the Initial Purchasers and the estimated expenses of the Offering payable by the Company. The Company used approximately $77.0 million of such net proceeds to pay in full the outstanding indebtedness under the Company's credit agreement (the "Credit Agreement") with a group of banks. The balance of the net proceeds of the Offering will be used by the Company for general corporate purposes, which may include future acquisitions of oil and gas properties. The Company intends to reborrow under the Credit Agreement from time to time as necessary to fund oil and gas acquisition, development, exploitation, exploration and production activities and for other general corporate purposes. For additional information regarding the Credit Agreement, see "Description of Certain Senior Indebtedness" and Note 3 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. 37 CAPITALIZATION The following table sets forth the capitalization of the Company at March 31, 1997, and as adjusted to give effect to the sale of the Outstanding Notes and the application of the estimated net proceeds therefrom as described under "Use of Proceeds." This information should be read in conjunction with "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus.
AT MARCH 31, 1997 --------------------- ACTUAL AS ADJUSTED -------- ----------- (IN THOUSANDS) Cash and marketable securities: Cash and cash equivalents.............................. $ 2,116 $ 45,120 Marketable securities.................................. 5,748 5,748 -------- -------- Total cash and marketable securities................. $ 7,864 $ 50,868 ======== ======== Long-term debt: Bank borrowings (1).................................... $ 76,908 $ -- 9 1/2% Senior Subordinated Notes due 2007 (2).......... -- 124,262 -------- -------- Total long-term debt................................. 76,908 124,262 Stockholders' equity: Preferred Stock -- $10.00 par value; 300,000 shares authorized; no shares issued and outstanding...................... -- -- Common Stock -- $3.00 par value; 20,000,000 shares authorized; 9,125,044 shares issued; 8,948,840 shares outstanding (3)....................................... 27,375 27,375 Paid-in capital........................................ 3,194 3,194 Retained earnings...................................... 72,258 72,258 Marketable securities valuation adjustment............. 3,462 3,462 Foreign currency translation........................... 864 864 Treasury stock, 176,204 shares, at cost................ (2,729) (2,729) -------- -------- Total stockholders' equity............................ 104,424 104,424 -------- -------- Total capitalization................................. $181,332 $228,686 ======== ========
- -------- (1) See "Description of Certain Senior Indebtedness" and Note 3 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus for additional information concerning the Company's bank borrowings. (2) Net of (i) approximately $352,000 of unamortized discount and (ii) approximately $386,000 of unamortized cost of an interest rate hedging arrangement entered into by the Company in anticipation of the Offering. The cost of the hedging arrangement was included in the expenses of the Offering payable by the Company. (3) Excludes shares issuable pursuant to the Company's stock incentive plans. At March 31, 1997, there were 997,600 shares of common stock of the Company issuable pursuant to options or other rights outstanding under such plans. 38 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The following selected consolidated financial data of the Company are derived from information contained in the Company's consolidated financial statements. The financial data for each of the five years in the period ended December 31, 1996 were derived from the audited consolidated financial statements of the Company. The financial data for the quarters ended March 31, 1997 and 1996 were derived from the unaudited consolidated financial statements of the Company, but in the opinion of management include all adjustments necessary for a fair presentation of the financial information. The results of operations for the quarter ended March 31, 1997 are not necessarily indicative of the results that may be expected for the full year. The selected consolidated financial and operating data presented below are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Company's Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus. For additional information regarding the Company's operations, see "Business and Properties."
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ---------------- -------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ------- ------- -------- -------- -------- -------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RATIOS) INCOME STATEMENT DATA: Revenues: Oil and gas sales..... $23,062 $16,233 $ 72,012 $ 54,400 $ 53,559 $ 40,329 $ 37,157 Dividends and interest............. 121 212 683 1,241 1,641 1,855 2,000 Marketable security sales gains.......... 1,813 2,005 12,977 13,101 7,475 -- -- Other................. 579 117 1,017 2,939 2,681 737 1,025 ------- ------- -------- -------- -------- -------- -------- Total revenues...... 25,575 18,567 86,689 71,681 65,356 42,921 40,182 ------- ------- -------- -------- -------- -------- -------- Costs and expenses: Production and operating............ 6,802 5,623 23,970 20,690 22,313 17,864 15,083 Purchased natural gas.................. 513 353 1,462 727 759 1,182 993 Depreciation, depletion and amortization......... 5,767 4,954 19,653 19,778 18,313 15,352 13,803 Property impairments.. -- -- 12,112 4,893 -- -- -- Exploration........... 621 1,266 4,176 5,801 4,130 3,639 6,308 General and administrative....... 2,378 2,795 9,364 8,193 6,502 5,429 4,199 Interest expense...... 1,264 1,360 5,452 5,618 3,907 530 31 ------- ------- -------- -------- -------- -------- -------- Total costs and expenses........... 17,345 16,351 76,189 65,700 55,924 43,996 40,417 ------- ------- -------- -------- -------- -------- -------- Income (loss) before income taxes.......... 8,230 2,216 10,500 5,981 9,432 (1,075) (235) Income tax expense (benefit)............. 2,089 705 4,072 3,788 444 (2,091) (712) ------- ------- -------- -------- -------- -------- -------- Net income............. $ 6,141 $ 1,511 $ 6,428 $ 2,193 $ 8,988 $ 1,016 $ 477 ======= ======= ======== ======== ======== ======== ======== Average outstanding shares (1)............ 8,949 8,939 8,954 8,939 8,941 8,939 8,938 Per share data: Net income per share.. $ 0.69 $ 0.17 $ 0.72 $ 0.25 $ 1.01 $ 0.11 $ 0.05 Cash dividends per share................ $ 0.03 $ 0.03 $ 0.12 $ 0.40 $ 0.40 $ 0.40 $ 0.40 OTHER FINANCIAL DATA: EBITDAX (2)............ $13,948 $ 7,579 $ 38,233 $ 27,729 $ 26,666 $ 16,591 $ 17,907 Operating cash flow.... 7,354 5,371 33,228 19,239 23,134 16,777 17,653 Capital expenditures (3)................... 12,311 8,804 46,231 31,052 73,186 72,321 17,218 Ratios: Ratio of earnings to fixed charges (4).... 7.5x 2.6x 2.9x 2.1x 3.4x N/A(5) N/A(5) Ratio of EBITDAX to fixed charges (2)(4)............... 11.0x 5.6x 7.0x 4.9x 6.8x 31.3x N/M Ratio of total debt to EBITDAX (2).......... N/A N/A 2.1x 2.7x 2.9x 2.8x N/M BALANCE SHEET DATA (END OF PERIOD): Cash and cash equivalents........... $ 2,116 $ 2,760 $ 5,870 $ 1,397 $ 2,714 $ 3,499 $ 14,525 Working capital (6).... 3,591 2,863 3,493 1,034 2,313 6,454 16,401 Marketable securities.. 5,748 17,671 7,176 19,592 27,337 34,781 3,845 Net property, plant and equipment............. 185,343 172,317 179,718 169,089 167,371 127,708 75,697 Total assets........... 209,782 206,789 208,617 203,407 210,791 177,782 102,340 Long-term debt......... 76,908 78,294 78,654 74,171 78,013 46,777 135 Stockholders' equity... 104,424 101,420 99,262 101,132 105,427 105,116 87,241
(See footnotes on following pages) 39
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, --------------- -------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ------- ------- -------- -------- -------- -------- -------- RESERVE AND OPERATING DATA: Production volumes: Oil and NGLs (MBbl)... 770 628 2,776 2,332 2,277 1,468 1,298 Natural gas (MMcf)(7)............ 3,171 3,334 12,288 12,171 11,076 8,296 6,996 Oil equivalents (MBOE)(7)........... 1,299 1,184 4,824 4,361 4,123 2,851 2,464 Weighted average sales prices(8): Oil (per Bbl)......... $ 19.60 $ 17.63 $ 18.81 $ 16.91 $ 15.60 $ 16.44 $ 19.07 Natural gas (per Mcf)(7).............. 2.63 1.67 1.77 1.37 1.73 2.07 1.95 NGLs (per Bbl)........ 15.29 12.74 13.36 10.11 9.00 9.42 10.11 Oil equivalents (per BOE)(7)............. 17.75 13.71 14.93 12.47 12.99 14.15 15.08 Selected expenses per BOE(9): Lease operating....... $ 4.23 $ 3.96 $ 4.14 $ 4.06 $ 4.54 $ 5.80 $ 5.63 Production taxes...... 1.12 0.88 0.93 0.78 0.97 0.72 0.75 Depreciation, depletion and amortization......... 4.54 4.27 4.16 4.62 4.53 5.35 5.24 General and administrative....... 1.87 2.41 1.98 1.92 1.61 1.98 1.78 Proved reserves (end of period)(10): Oil and NGLs (MBbl)... N/A N/A 31,612 32,208 23,430 21,242 11,756 Natural gas (MMcf).... N/A N/A 113,377 109,915 107,920 103,317 70,034 Oil equivalents (MBOE).............. N/A N/A 50,508 50,527 41,417 38,462 23,428 Estimated future net revenues before income taxes (in thousands)........... N/A N/A $705,723 $401,037 $272,776 $241,251 $210,591 Present Value (in thousands)........... N/A N/A $414,314 $235,416 $160,804 $137,149 $116,611 Standardized Measure of Discounted Future Net Cash Flows (in thousands)(11)....... N/A N/A $317,180 $194,602 $142,032 $112,423 $ 86,559 Weighted average sales prices (end of period)(10)(12): Oil (per Bbl)......... N/A N/A $ 24.63 $ 18.19 $ 16.11 $ 13.35 $ 17.29 Natural gas (per Mcf)................. N/A N/A $ 3.45 $ 1.84 $ 1.57 $ 2.34 $ 2.36 NGLs (per Bbl)........ N/A N/A $ 19.79 $ 12.87 $ 9.80 $ 9.07 $ 8.04
- ------- (1) Calculated using the treasury stock method. Under this method, average outstanding shares for the quarter ended March 31, 1997 and the year ended December 31, 1996 exclude 997,600 and 864,582 shares, respectively, issuable pursuant to the Company's stock incentive plans at such dates. (2) EBITDAX is not a generally accepted accounting measure, but is presented as a supplemental financial indicator of the Company's ability to service or incur debt. EBITDAX is calculated by adding interest expense, income tax expense, depreciation, depletion and amortization, property impairment costs and exploration costs to net income (excluding marketable security sales gains and dividends and interest). EBITDAX should not be considered in isolation or as a substitute for net income, operating cash flows or any other measure of financial performance prepared in accordance with generally accepted accounting principles or as a measure of the Company's profitability or liquidity. (3) Consist of costs incurred by the Company in connection with its oil and gas acquisition, development and exploration activities, and, in certain years, costs relating to the reconditioning of its gas plants. See Note 6 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. (4) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income (loss) before income taxes and fixed charges. Fixed charges consist of interest expense. (See footnotes on following page) 40 (5) Earnings were insufficient to cover fixed charges by $1,075,000 and $235,000 for the years ended December 31, 1993 and 1992, respectively. (6) Working capital represents the difference between current assets and current liabilities. (7) Calculated giving effect to volumes of natural gas purchased for resale as follows: first quarter of 1997--168 MMcf, first quarter of 1996--134 MMcf, 1996--605 MMcf, 1995--500 MMcf, 1994--469 MMcf, 1993--666 MMcf and 1992--600 MMcf. (8) Reflects results of hedging activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Matters." (9) Calculated without giving effect to volumes of natural gas purchased for resale. (10) Estimates of proved reserves and future net revenues from which Present Values are derived are based on year end prices of oil and gas held constant (except to the extent a contract specifically provides otherwise) in accordance with SEC regulations. The prices of oil and gas at December 31, 1996 used to estimate the Company's proved reserves and future net revenues from which Present Value is derived were substantially higher than the prices used in previous years to make such estimates and substantially higher than oil and gas prices at May 30, 1997. For additional information regarding the effect of prices on proved reserves, estimated future net revenues and Present Values, see "Business and Properties--Oil and Gas Reserves." (11) The Standardized Measure of Discounted Future Net Cash Flows prepared by the Company represents the present value (using an annual discount rate of 10%) of estimated future net revenues from the production of proved reserves, after giving effect to income taxes. See the Supplemental Financial Information attached to the Company's Consolidated Financial Statements included elsewhere in this Prospectus for additional information regarding the disclosure of the Standardized Measure of Discounted Future Net Cash Flows. (12) Year end prices used to estimate proved reserves and future net revenues from which Present Values are derived. See footnote 10 above. 41 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is intended to assist in an understanding of the Company's historical financial position and results of operations for each year in the three-year period ended December 31, 1996 and for the unaudited quarterly periods ended March 31, 1997 and 1996. The Company's Consolidated Financial Statements and notes thereto included elsewhere in this Prospectus contain detailed information that should be referred to in conjunction with the following discussion. GENERAL The Company's results of operations have been significantly affected by its Maljamar waterflood project, Wellman Unit CO/2/ gas injection project and 1994 acquisition and subsequent development, exploitation and exploration of its Canadian oil and gas properties. The Company has achieved increases in its oil and gas production primarily as a result of these activities. The Company owns certain marketable securities and, in connection with its change in business strategy, has been liquidating portions of its portfolio in order to fund a portion of the Company's capital expenditures. The Company recognized pretax gains from the sale of marketable securities of $13.0 million, $13.1 million and $7.5 million in 1996, 1995 and 1994, respectively, and $1.8 million in the first quarter of 1997. In the absence of such gains, the Company would have reported net losses in 1996 and 1995, and its net income in 1994 and the first quarter of 1997 would have been reduced. The Company plans to liquidate the remainder of its marketable securities (valued at $5.7 million at March 31, 1997) in 1997. Accordingly, the positive impact that sales of marketable securities have had on the Company's net income is not expected to continue, and sales of marketable securities will no longer be a source of funds, beyond 1997. See "Risk Factors--Impact on Net Income of Marketable Security Sales Gains" and "--Substantial Capital Requirements." During 1995, the Company adopted SFAS No. 121, which requires the Company to assess the need for an impairment of capitalized costs of oil and gas properties on a property-by-property (rather than a company-wide) basis. Applying SFAS No. 121, the Company recognized non-cash property impairment charges of $12.1 million in 1996 and $4.9 million in 1995. See "Risk Factors-- Property Impairment Charges" and "--Results of Operations." The Company's future results of operations and growth are substantially dependent upon (i) its ability to acquire or find and successfully develop additional oil and gas reserves and (ii) the prevailing prices for oil and gas. At December 31, 1996, the Company's proved reserves were comprised of approximately 90% proved developed reserves, and the Company does not have a large inventory of development drilling locations or enhanced recovery projects to pursue after 1997. If the Company is unable to economically acquire or find significant new reserves for development and exploitation, the Company's oil and gas production, and thus its revenues, would likely decline gradually as its reserves are produced. In addition, oil and gas prices are dependent upon numerous factors beyond the Company's control, such as economic, political and regulatory developments and competition from other sources of energy. The oil and gas markets have historically been very volatile, and any significant and extended decline in the price of oil or gas would have a material adverse effect on the Company's financial condition and results of operations, and could result in a reduction in the carrying value of the Company's proved reserves and adversely affect its access to capital. See "Risk Factors--Volatility of Oil and Gas Prices" and "Business and Properties--Oil and Gas Reserves." The Company follows the successful efforts method of accounting for oil and gas producing activities. Under this method, the Company capitalizes all costs incurred to acquire interests in oil and gas properties, to drill and equip exploratory wells in which proved reserves are discovered and to drill 42 and equip development wells. Geological and geophysical costs, delay rentals and technical support costs are expensed as incurred. The costs of drilling and equipping exploratory wells in which proved reserves are not discovered are expensed upon a determination that a well does not justify commercial development. The capitalized costs of producing oil and gas properties are depreciated and depleted using the units-of-production method based on estimated proved reserves. Unproved oil and gas properties are periodically assessed for impairment of value, and if an impairment is determined to exist, such impairment is expensed. The successful efforts method of accounting could affect the Company's income from operations depending upon the Company's level of drilling activities and the results of such drilling in any year. RESULTS OF OPERATIONS Production information presented below includes volumes of natural gas purchased for resale; however, per unit of production information with respect to production and operating expenses, depreciation, depletion and amortization and general and administrative costs is calculated without giving effect to such volumes. Such volumes were 168 MMcf in the first quarter of 1997, 134 MMcf in the first quarter of 1996, 605 MMcf in 1996, 500 MMcf in 1995 and 469 MMcf in 1994. Comparison of Quarter Ended March 31, 1997 to Quarter Ended March 31, 1996 Income Before Income Taxes and Net Income. Income before income taxes increased 273% to $8.2 million for the first quarter of 1997 from $2.2 million in the first quarter of 1996. Net income increased 307% to $6.1 million in the first quarter of 1997 from $1.5 million in the first quarter of 1996. The improvement in income before incomes taxes and net income was attributable primarily to higher production and higher net realized prices during the first quarter of 1997. Production. The Company's net oil production rose 26% to 687 MBbls in the first quarter of 1997 from 545 MBbls in the first quarter of 1996. Net natural gas production decreased 5% to 3,171 MMcf in the first quarter of 1997 from 3,334 MMcf in the first quarter of 1996. Net NGL production was 83 MBbls in the first quarter of 1997 and the first quarter of 1996. On an equivalent unit basis, net production increased 10% to 1,299 MBOE in the first quarter of 1997 from 1,184 MBOE in the first quarter of 1996. The increase in production was primarily attributable to higher oil production from the Company's Maljamar properties as a result of continued development drilling. Revenues. Total revenues increased 38% to $25.6 million in the first quarter of 1997 from $18.6 million in the first quarter of 1996, primarily because of higher production and higher net realized prices during the first quarter of 1997. Average net realized oil prices rose 11% to $19.60 per Bbl in the first quarter of 1997 from $17.63 per Bbl in the first quarter of 1996. Average net realized natural gas prices rose 57% to $2.63 per Mcf in the first quarter of 1997 from $1.67 per Mcf in the first quarter of 1996. Average net realized NGL prices rose 20% to $15.29 per Bbl in the first quarter of 1997 from $12.74 per Bbl in the first quarter of 1996. The average net realized oil, gas and NGL prices received in the first quarter of 1997 of $19.60 per Bbl, $2.63 per Mcf and $15.29 per Bbl, respectively, compared to average prices of $21.00 per Bbl, $2.63 per Mcf and $15.53 per Bbl, respectively, which would have been received before the effects of the Company's hedging activities, which activities resulted in a reduction of $1.0 million in the Company's oil and gas sales for the first quarter of 1997. Adjustments to oil and gas sales from the Company's hedging activities resulted in a reduction of $0.9 million in oil and gas revenues during the first quarter of 1996. Dividends and interest decreased 43% to $0.1 million in the first quarter of 1997 from $0.2 million in the first quarter of 1996, primarily as a result of sales of marketable securities in 1996. The Company recognized a pretax gain of $1.8 million from marketable security sales in the first quarter of 1997, compared with a pretax gain of $2.0 million from similar sales in the first quarter of 1996. Other revenues of the Company increased 395% to $0.6 million in the first quarter of 1997 from $0.1 million 43 in the first quarter of 1996, primarily as a result of the sale of producing oil and gas properties in Michigan in the first quarter of 1997. Production and Operating Expenses. Production and operating expenses increased 21% to $6.8 million in the first quarter of 1997 from $5.6 million in the first quarter of 1996, primarily due to additional development wells completed at the Maljamar properties and higher production taxes associated with higher oil and gas prices received during the first quarter of 1997. On an equivalent unit of production basis, such expenses increased 10% to $5.35 per BOE in the first quarter of 1997 from $4.84 per BOE in the first quarter of 1996. Depreciation, Depletion and Amortization ("DD&A"). DD&A increased 16% to $5.8 million in the first quarter of 1997 from $5.0 million in the first quarter of 1996. The DD&A rate per BOE increased 6% to $4.54 in the first quarter of 1997 from $4.27 in the first quarter of 1996. The increase in the DD&A rate per BOE in the first quarter of 1997 was due primarily to higher DD&A from Canadian properties. Exploration Costs. Exploration costs decreased 51% to $0.6 million in the first quarter of 1997 from $1.3 million in the first quarter of 1996, primarily as a result of lower dry hole expenses resulting from reduced exploratory drilling in Canada. General and Administrative Costs. General and administrative costs decreased 15% to $2.4 million in the first quarter of 1997 from $2.8 million in the first quarter of 1996, primarily as a result of higher legal fees incurred in the first quarter of 1996 in connection with a lawsuit won by the Company. On an equivalent unit of production basis, general and administrative costs decreased 22% to $1.87 per BOE in the first quarter of 1997 from $2.41 per BOE in the first quarter of 1996. Interest Expense. Interest expense decreased 7% to $1.3 million in the first quarter of 1997 from $1.4 million in the first quarter of 1996. Effective Tax Rate. The Company's effective tax rate decreased to 25% in the first quarter of 1997 from 32% in the first quarter of 1996, due to the inclusion of Canadian tax losses beginning January 1, 1997 as a result of a restructuring of the Company's Canadian operating subsidiary. Comparison of 1996 to 1995 Income Before Income Taxes and Net Income. Income before income taxes increased 75% to $10.5 million for 1996 from $6.0 million in 1995. Net income increased 191% to $6.4 million in 1996 from $2.2 million in 1995. The improvement in income before income taxes and net income was attributable primarily to higher production and higher net realized prices during 1996. Production. The Company's net oil production rose 17% to 2,425 MBbls in 1996 from 2,080 MBbls in 1995. Net natural gas production increased 1% to 12,288 MMcf in 1996 from 12,171 MMcf in 1995. Net NGL production increased 39% to 351 MBbls in 1996 from 252 MBbls in 1995. On an equivalent unit basis, net production increased 11% to 4,824 MBOE in 1996 from 4,361 MBOE in 1995. The increase in production was primarily attributable to development activities which resulted in the addition of 102 net producing wells in 1996. Revenues. Total revenues increased 21% to $86.7 million in 1996 from $71.7 million in 1995, primarily because of higher production and higher net realized prices during 1996. Average net realized oil prices rose 11% to $18.81 per Bbl in 1996 from $16.91 per Bbl in 1995. Average net realized natural gas prices rose 29% to $1.77 per Mcf in 1996 from $1.37 per Mcf in 1995. Average net realized NGL prices rose 32% to $13.36 per Bbl in 1996 from $10.11 per Bbl in 1995. The average net realized oil, gas and NGL prices received in 1996 of $18.81 per Bbl, $1.77 per Mcf and $13.36 per Bbl, respectively, compared to average prices of $20.86 per Bbl, $1.92 per Mcf and $13.64 per Bbl, 44 respectively, which would have been received before the effects of the Company's hedging activities, which activities resulted in a reduction of $6.9 million in the Company's oil and gas sales for 1996. Effects of hedging activities were not significant in 1995. Dividends and interest decreased 42% to $0.7 million in 1996 from $1.2 million in 1995, primarily as a result of sales of marketable securities in 1996 and 1995. The Company recognized a pretax gain of $13.0 million from marketable security sales in 1996, compared with a pretax gain of $13.1 million from similar sales in 1995. Other revenues of the Company decreased 66% to $1.0 million in 1996 from $2.9 million in 1995, primarily as a result of fewer sales of non-strategic properties in 1996. Production and Operating Expenses. Production and operating expenses increased 16% to $24.0 million in 1996 from $20.7 million in 1995, primarily due to higher production taxes resulting from higher revenues from sales of oil and gas. On an equivalent unit of production basis, such expenses increased 5% to $5.07 per BOE in 1996 from $4.84 per BOE in 1995. Depreciation, Depletion and Amortization. DD&A decreased 1% to $19.7 million in 1996 from $19.8 million in 1995. The DD&A rate per BOE decreased 10% to $4.16 in 1996 from $4.62 in 1995. The decrease in the DD&A rate per BOE in 1996 was due primarily to upward revisions of previous estimates of the Company's proved reserves attributable to certain of its properties in the Permian Basin and Canada during 1996, while capitalized costs relating to such properties remained relatively constant. Property Impairment Charges. The Company recognized non-cash property impairment charges of $12.1 million in 1996 and $4.9 million in 1995 as a result of applying the provisions of SFAS No. 121. The impairment charge for 1996 resulted from a downward revision of previous estimates of the Company's proved reserves attributable to certain of its properties in Michigan and Canada. The impairment charge for 1995 resulted from a downward revision of previous estimates of the Company's proved reserves attributable to certain of its Canadian properties. Exploration Costs. Exploration costs decreased 28% to $4.2 million in 1996 from $5.8 million in 1995, primarily as a result of a temporary reduction by the Company in its 1996 domestic exploration activities due to a redirection of its exploration program in the fourth quarter of 1996. See "Business and Properties--Business Strategy." General and Administrative Costs. General and administrative costs increased 15% to $9.4 million in 1996 from $8.2 million in 1995, primarily as a result of higher compensation costs and professional fees relating to acquisition and tax matters. On an equivalent unit of production basis, general and administrative costs increased 3% to $1.98 per BOE in 1996 from $1.92 per BOE in 1995. Interest Expense. Interest expense decreased 2% to $5.5 million in 1996 from $5.6 million in 1995. Effective Tax Rate. The Company's effective tax rate decreased to 39% in 1996 from 63% in 1995. This decrease was due primarily to a decrease in 1996 in the amount of tax loss attributable to the Company's Canadian operations that was not deductible for purposes of United States federal income taxes. In addition, the Company's Internal Revenue Code Section 29 income tax credits relating to its San Juan Basin properties increased 15% to $1.5 million in 1996 from $1.3 million in 1995. Comparison of 1995 to 1994 Income Before Income Taxes and Net Income. Income before income taxes decreased 36% to $6.0 million in 1995 from $9.4 million in 1994. Net income decreased 76% to $2.2 million in 1995 from 45 $9.0 million in 1994. The decrease in income before income taxes was due primarily to a non-cash property impairment charge of $4.9 million against 1995 income, all of which related to impairments of certain of Wiser's Canadian properties, compared with no such charge in 1994. The decrease in net income was due primarily to (i) such property impairment charge and (ii) an increase in income tax expense to $3.8 million in 1995 from $0.4 million in 1994, due principally to a decrease in the deferred tax asset valuation reserve in 1994 which did not occur in 1995. The property impairment charge and the increase in income tax expense in 1995 were partially offset by a pretax gain of $13.1 million from the sale by the Company of a portion of its marketable securities portfolio in 1995, compared with a pretax gain of $7.5 million from similar sales in 1994. Production. The Company's net oil production decreased 1% to 2,080 MBbls in 1995 from 2,104 MBbls in 1994. Net natural gas production increased 10% to 12,171 MMcf in 1995 from 11,076 MMcf in 1994. Net NGL production increased 46% to 252 MBbls in 1995 from 173 MBbls in 1994. The Company's total net equivalent production increased 6% to 4,361 MBOE in 1995 from 4,123 MBOE in 1994, primarily as a result of 34 net producing wells completed in 1995. Revenues. Total revenues increased 10% to $71.7 million in 1995 from $65.4 million in 1994, primarily because of an increase of $5.6 million in pretax gains from the sale by the Company of marketable securities in 1995 compared with pretax gains from similar sales in 1994. Oil and gas revenues for 1995 remained relatively constant, increasing 1% to $54.4 million in 1995 from $53.6 million in 1994. This increase was due primarily to higher production in 1995, partially offset by a 4% decrease in 1995 in average net realized prices on an oil equivalent basis. Average net realized oil prices rose 8% to $16.91 per Bbl in 1995 from $15.60 per Bbl in 1994, while average net realized natural gas prices declined 21% to $1.37 per Mcf in 1995 from $1.73 per Mcf in 1994. Average net realized NGL prices rose 12% to $10.11 per Bbl in 1995 from $9.00 per Bbl in 1994. Production and Operating Expenses. Production and operating expenses decreased 7% to $20.7 million in 1995 from $22.3 million in 1994, primarily as a result of sales by the Company of non-strategic properties in late 1994. On an equivalent unit of production basis, such expenses decreased 12% to $4.84 per BOE in 1995 from $5.51 per BOE in 1994. Depreciation, Depletion and Amortization. DD&A increased 8% to $19.8 million in 1995 from $18.3 million in 1994, primarily as a result of an additional $4.8 million in DD&A attributable to a full year of ownership of the Company's Canadian properties in 1995, partially offset by a decrease of $3.2 million in DD&A due to sales by the Company in late 1994 of certain non-strategic properties with high DD&A rates. The DD&A rate per BOE increased 2% to $4.62 in 1995 from $4.53 in 1994. Exploration Costs. Exploration costs increased 41% to $5.8 million in 1995 from $4.1 million in 1994, primarily as a result of higher dry hole costs in 1995. General and Administrative Costs. General and administrative costs increased 26% to $8.2 million in 1995 from $6.5 million in 1994. Of this increase, $1.0 million was due to the inclusion in 1995 operating results of a full year of Canadian operations and $0.7 million was attributable to higher legal expenses. On an equivalent unit of production basis, general and administrative costs increased 19% to $1.92 per BOE in 1995 from $1.61 per BOE in 1994. Interest Expense. Interest expense increased 44% to $5.6 million in 1995 from $3.9 million in 1994. This increase was due primarily to the inclusion in 1995 operating results of a full year's interest expense related to the $52.0 million of bank debt incurred in connection with the Company's purchase of its Canadian properties in 1994. Effective Tax Rate. The Company's effective tax rate increased to 63% in 1995 from 5% in 1994. The increase was due primarily to an increase in net operating losses attributable to the Company's 46 Canadian operations for which no current United States federal income tax benefit was available and benefits realized in 1994 from the recognition of previously reserved deferred tax assets which were not available in 1995. LIQUIDITY AND CAPITAL RESOURCES General Working capital at March 31, 1997 was $3.6 million, representing a $0.1 million increase over the corresponding amount at December 31, 1996. At March 31, 1997, the Company had $2.1 million in cash and cash equivalents and $209.8 million of total assets. At March 31, 1997, capitalization totaled $181.3 million, of which approximately 58% was represented by stockholders' equity and 42% by long-term debt. All of the long-term debt was comprised of borrowings under the Credit Agreement. Capital Sources Funding for the Company's business activities has been provided by cash flow from operations, bank financing and sales of marketable securities. The Company anticipates liquidating the remainder of its marketable securities during 1997. Accordingly, this source of funds is not expected to be available after 1997. See "Risk Factors--Substantial Capital Requirements." While the Company regularly engages in discussions relating to potential acquisitions of oil and gas properties (some of which may be material to the Company), the Company has no current agreement or commitment with respect to any such acquisition, other than as described herein under "Prospectus Summary--Recent Development" and other than relatively minor acquisitions of oil and gas properties and interests in its normal course of business. Any future acquisitions may require additional financing and will be dependent upon financing arrangements available at the time. The Company believes that funds provided by internally generated cash flows, including the sale of its remaining marketable securities, will be sufficient to meet anticipated operating and capital expenditure requirements (excluding any property acquisitions) in 1997. If the Company's internally generated cash flows are less than anticipated or its capital needs are greater than anticipated, the Company may borrow funds under the Credit Agreement. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, the Company would have had $50.9 million in cash and marketable securities, no indebtedness outstanding under the Credit Agreement and $80.0 million of borrowing capacity available under the Credit Agreement. The Credit Agreement limits the amount of consolidated senior funded debt (defined in the Credit Agreement to exclude the Notes but include indebtedness under the Credit Agreement and other indebtedness for borrowed money and similar obligations) that the Company may borrow to the borrowing base in effect from time to time under the Credit Agreement, as determined by the banks that are parties thereto. Various factors (including declines in the price of oil or gas) could result in a reduction of the Company's borrowing base under the Credit Agreement. If the Company's cash flow from operations and the availability under the Credit Agreement are not sufficient to satisfy its cash requirements, there can be no assurance that additional equity or debt financing will be available to meet such requirements. See "Risk Factors-- Substantial Capital Requirements." Credit Agreement The Credit Agreement provides for a revolving credit facility to the Company. For a description of the Credit Agreement and the Credit Agreement Amendments, see "Description of Certain Senior Indebtedness." 47 At December 31, 1996, the outstanding principal balance of indebtedness under the Credit Agreement was $58.0 million, all of which was bearing interest at 6.31% per annum. These borrowings were used by the Company to finance property acquisitions and for other general corporate purposes. The average interest rate paid by the Company on borrowings under the Credit Agreement during 1996 was 6.04% per annum. On March 10, 1997, the Company borrowed $23.9 million under the Credit Agreement to pay in full its outstanding indebtedness under its Maljamar project financing credit facility (the "Maljamar Credit Facility"), and the Company thereafter terminated such facility. For a description of the Maljamar Credit Facility, see Note 3 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. During the first quarter of 1997, the Company applied $1.7 million of its operating cash flows to reduce its indebtedness under the Credit Agreement to $76.9 million at March 31, 1997, all of which was bearing interest at 6.25% per annum. The Company used approximately $77.0 million of the net proceeds of the Offering to pay in full the outstanding indebtedness under the Credit Agreement. The Company intends to reborrow under the Credit Agreement from time to time as necessary to fund oil and gas acquisition, development, exploitation and exploration activities and for other general corporate purposes. Cash Flow Analysis Cash Flows from Operating Activities. Cash flows from operating activities were $7.4 million during the first quarter of 1997, compared with $5.4 million during the first quarter of 1996. Cash flows from operating activities were $33.2 million in 1996, $19.2 million in 1995 and $23.1 million in 1994. The increase in cash flows from operating activities for the first quarter of 1997 and during 1996 was due primarily to higher production and higher net realized prices in those periods. The decrease in cash flows for 1995 compared to 1994 was due primarily to higher interest expense and income taxes paid in 1995. Cash Flows from Investing Activities. Cash flows used in investing activities increased to $9.2 million in the first quarter of 1997, compared with $6.7 million in the first quarter of 1996. Cash flows used in investing activities increased to $31.0 million in 1996 from $13.1 million in 1995. These increases were caused primarily by an increase in capital expenditures. Capital expenditures were $12.3 million in the first quarter of 1997, compared with $8.8 million in the first quarter of 1996, and were $46.2 million in 1996 compared with $31.1 million in 1995. Cash flows used in investing activities decreased to $13.1 million in 1995 from $51.6 million in 1994. Cash flows used in investing activities in 1994 included $52.0 million for the acquisition by the Company of Canadian oil and gas properties in June 1994. Cash flows from investing activities in 1996, 1995, 1994 and the first quarter of 1997 included $14.0 million, $14.5 million, $8.3 million and $1.9 million, respectively, in proceeds from marketable security sales. At March 31, 1997, the Company's marketable securities portfolio had been reduced to $5.7 million in value. The Company anticipates liquidating the remainder of its marketable securities during 1997. Cash Flows from Financing Activities. Cash flows from financing activities were $1.9 million in the first quarter of 1997, compared with $2.7 million in the first quarter of 1996. Cash flows from financing activities were $2.2 million in 1996 compared to $7.5 million used in financing activities in 1995. During the first quarter of 1997, the Company reduced its total long-term debt by $1.7 million. During 1996, the Company increased its total long-term debt by $4.5 million in connection with financing development activities in the Maljamar area. The Company also reduced its cash dividends to $1.1 million in 1996 from $3.6 million in 1995. During 1995, the Company reduced its total long-term debt by $3.8 million. Cash flows used in financing activities were $7.5 million in 1995 compared with $27.7 million in cash flows from financing activities in 1994. During 1994, total long-term debt increased $31.2 million as a result of financing the acquisition of the Canadian oil and gas properties. 48 Capital Expenditures The Company requires capital primarily for the acquisition, development and exploitation of, and the exploration for, oil and gas properties, the repayment of indebtedness and general working capital needs. Capital expenditures of the Company increased approximately 40% to $12.3 million in the first quarter of 1997 from $8.8 million in the first quarter of 1996, primarily as a result of the addition of secondary recovery facilities at the Company's Maljamar waterflood project and the acquisition of unproved leasehold acreage. Capital expenditures increased approximately 49% to $46.2 million in 1996 from $31.1 million in 1995, primarily as a result of an increase in capital expenditures related to the Maljamar waterflood project. Capital expenditures decreased approximately 58% to $31.1 million in 1995 from $73.2 million in 1994. Capital expenditures in 1994 included $52.0 million for the purchase of certain Canadian oil and gas properties in June 1994. Excluding the 1994 Canadian acquisition, capital expenditures increased approximately 47% to $31.1 million in 1995 from $21.2 million in 1994. The increase reflected a full year of capital expenditures in Canada, the completion of modifications to a gas processing plant at the Company's Wellman Unit and an increase in capital expenditures related to the Maljamar waterflood project. During 1997, subject to market conditions and drilling and operating results, the Company expects to spend approximately $44.3 million on development, exploitation and exploration activities. Of this amount, the Company has budgeted $31.3 million for development and exploitation activities and $13.0 million for exploration activities. See "Risk Factors--Volatility of Oil and Gas Prices" and "--Replacement and Expansion of Reserves" and "Business and Properties--Principal Oil and Gas Properties" and "--Exploration Activities." OTHER MATTERS Hedging Activities The Company has entered into and may in the future enter into hedging arrangements with respect to portions of its oil, natural gas and NGL production to reduce its sensitivity to volatile commodity prices. The Company believes that hedging, although not free of risk, allows the Company to achieve a more predictable cash flow and to reduce exposure to price fluctuations. However, hedging arrangements limit the benefit to the Company of increases in the prices of the hedged commodity. Moreover, the Company's hedging arrangements apply only to a portion of its production and provide only partial price protection against declines in prices. Such arrangements may expose the Company to risk of financial loss in certain circumstances. See "Risk Factors--Risk of Hedging Activities." The Company adjusts the price received for the hedged production during the period the hedged transactions occur. Adjustments to oil and gas sales from the Company's hedging activities resulted in a reduction in the Company's revenues of $6.9 million and $1.0 million, respectively, for the year ended December 31, 1996 and the quarter ended March 31, 1997. Hedging activities in 1995 and 1994 did not result in any material increase or decrease in oil and gas revenues. The Company expects that the amount of production it hedges will vary from time to time. The Company continuously reevaluates its hedging program in light of market conditions, commodity price forecasts, capital spending and debt service requirements. 49 At December 31, 1996, approximately 41% of the Company's total expected oil production through December 1997 was hedged under collar arrangements as follows:
DAILY VOLUME FLOOR PRICE CEILING PRICE BEGINNING DATE ENDING DATE (BBLS) (PER BBL) (PER BBL) -------------- ----------- ------------ ----------- ------------- January 1, 1997 December 31, 1997 1,000 $16.00 $18.85 January 1, 1997 December 31, 1997 1,000 21.80(1) 25.55(1) January 1, 1997 March 31, 1997 2,000 16.00 19.41 April 1, 1997 June 30, 1997 2,000 17.00 19.00 July 1, 1997 September 30, 1997 2,000 17.00 19.00
- -------- (1) Canadian dollars. At December 31, 1996, approximately 40% of the Company's total expected NGL production from January 1 through March 31, 1997 was hedged at a weighted average swap price of $18.76 per Bbl. See Note 1 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. Effects of Fluctuations in Exchange Rates The Company receives a substantial portion of its revenue in Canadian dollars. As a result, fluctuations in the exchange rates of the Canadian dollar with respect to the U.S. dollar could have an adverse effect on the Company's financial condition and results of operations. Historically, exchange rate fluctuations have not been material to the Company. See "Risk Factors--International Operations." Environmental and Other Regulatory Matters The Company's business is subject to certain federal, state, provincial and local laws and regulations relating to the development, exploitation, production and gathering of, and the exploration for, oil and gas, including those relating to the protection of the environment. Many of these laws and regulations have become more stringent in recent years, often imposing greater liability on a larger number of potentially responsible parties. Although the Company believes it is in substantial compliance with all applicable laws and regulations, the requirements imposed by laws and regulations are frequently changed and subject to interpretation, and the Company is unable to predict the ultimate cost of compliance with these requirements or their effect on its operations. Although significant expenditures may be required to comply with governmental laws and regulations applicable to the Company, compliance has not had a material adverse effect on the earnings or competitive position of the Company. See "Risk Factors--Compliance with Environmental and Other Governmental Regulations" and "Business and Properties--Governmental Regulation" and "--Environmental Matters." 50 BUSINESS AND PROPERTIES GENERAL Founded in 1905, The Wiser Oil Company is one of the oldest public independent oil and gas companies in the United States. In recent years, the Company has successfully implemented a new business strategy adopted in 1991, emphasizing growth in reserves and production volumes through acquisitions and subsequent development and exploitation of acquired properties. Since its change in strategic direction, the Company's total proved reserves have grown to 50.5 MMBOE (approximately 63% of which were oil and NGLs) at December 31, 1996 from 24.3 MMBOE at December 31, 1991, and its annual net production has grown to 4.7 MMBOE in 1996 from 2.3 MMBOE in 1991. The Company's primary operations, representing approximately 62% of its proved reserves at December 31, 1996, are located in the Permian Basin in West Texas and Southeast New Mexico. Wiser has additional operations in Alberta, Canada, the Appalachian Basin in Kentucky, Tennessee and West Virginia and the San Juan Basin in New Mexico. Prior to 1991 the Company focused primarily on the acquisition of non-operated interests in oil and gas properties. In 1991 the Company moved its headquarters from Sistersville, West Virginia to Dallas, Texas and began to assemble an experienced management team with substantial acquisition, exploitation and development expertise. After reviewing the Company's existing property portfolio and refining the new business strategy, the management team began disposing of the Company's non-strategic assets and acquiring and operating properties in new core areas with the potential for increased reserves and production volumes. Pursuant to this strategy, the Company acquired and developed properties in the Permian Basin and Canada, and successfully added reserves and production through workovers, recompletions, waterfloods and CO/2/ gas injections, as well as the drilling of exploratory, development and infill wells. A substantial portion of the Company's growth in reserves and production volumes since 1991 has been the result of (i) two successful enhanced oil recovery projects on properties acquired from 1992 to 1995 in the Permian Basin and (ii) the Company's 1994 acquisition and subsequent exploration on and exploitation of properties in Alberta, Canada. From June 1993 through December 1996, the Company completed 113 producing wells on its Maljamar waterflood project in Southeast New Mexico. As a result, the Company's average daily net oil production from the three units in this project increased to 2,800 Bbls in December 1996 from 580 Bbls in January 1993 (on a pro forma combined basis, assuming the Company had acquired all three units at January 1, 1993). At its Wellman Unit in West Texas, the Company used CO/2/ gas injection and refurbished a natural gas processing plant to increase average daily net production to 927 Bbls of oil, 440 Bbls of NGLs and 547 Mcf of natural gas in December 1996 from 650 Bbls of oil and no NGLs or natural gas in December 1993. In June 1994 the Company acquired oil and gas properties located primarily in Alberta, Canada for $52.0 million. From the date of this acquisition through December 1996, the Company completed 22 net wells on these properties. As a result, the Company's average daily net Canadian production increased to 3,200 BOE in December 1996 from 1,860 BOE in June 1994. The Company's principal executive offices are located at 8115 Preston Road, Suite 400, Dallas, Texas 75225, and its telephone number is (214) 265-0080. BUSINESS STRATEGY The Company's strategy is to grow reserves and production volumes through (i) acquiring producing properties that provide significant development and exploitation potential, (ii) developing and exploiting its reserve base in order to maximize production and recoverable reserves and (iii) exploring for oil and gas reserves, while (iv) maintaining financial flexibility. 51 PURSUE STRATEGIC ACQUISITIONS. Over the last several years, the Company has assembled an experienced management team which uses a comprehensive interdisciplinary and technical approach to evaluate potential acquisitions of oil and gas properties. The Company's property acquisition criteria include: (a) existing oil and gas production; (b) significant potential for increasing reserves and production through development, exploitation (including enhanced recovery techniques) or exploration; (c) proximity to the Company's existing core operating areas or, in the alternative, sufficient critical mass to justify diversification into a new area; (d) opportunities to lower unit costs; and (e) an attractive purchase price. In addition, the Company will continue to consider strategic combinations with other industry participants in order to achieve operating synergies, greater asset diversification and enhanced financial flexibility. CAPITALIZE UPON DEVELOPMENT AND EXPLOITATION EXPERTISE. The Company believes that one of its primary strengths is its expertise and experience in the exploitation of oil and gas properties through enhanced recovery operations and other methods. The Company believes that this strength differentiates it from other independent oil and gas companies of similar size. The Company has successfully added reserves and production volumes to existing and acquired properties through workovers, recompletions, waterfloods and CO/2/ gas injections, as well as the drilling of development or infill wells. The Company's success in the Maljamar waterflood project and the Wellman Unit CO/2/ gas injection project exemplify how the Company has capitalized on this core competency. The Company has budgeted $20.3 million for development and exploitation activities at the Maljamar and Wellman projects in 1997, and intends to continue to seek opportunities that would allow it to utilize further its development and exploitation expertise. EXPAND EXPLORATION PROGRAM. The Company is increasingly placing greater emphasis on exploration as a source of future growth, and focuses on exploration opportunities that can benefit from advanced technologies, including 3-D seismic, designed to reduce risks and increase success rates. In 1996 the Company hired a new Vice President of Exploration with over 33 years of exploration experience with major integrated and independent oil and gas companies to lead its domestic exploration group. This group is developing a balanced portfolio of exploration prospects in areas where it believes multiple prospects could be developed if a significant discovery were made. In addition, this group is responsible for domestic exploration activities on existing properties. In Canada, exploration has represented a significant portion of the Company's capital budget since 1994. The Company's activities for the winter 1996/1997 Canadian drilling season included participation in five gross exploratory wells (four of which were successful) to test five prospects. On a Company-wide basis, the 1997 exploration budget comprises $13.0 million (approximately 29%) of the Company's $44.3 million 1997 capital expenditure program, compared with exploration expenditures of $3.5 million (approximately 8%) of the Company's total capital expenditures of $46.2 million in 1996. MAINTAIN FINANCIAL FLEXIBILITY. The Company is committed to maintaining financial flexibility, which it believes is important for the successful implementation of its growth strategy. The Company currently expects its 1997 capital expenditure budget (excluding any property acquisitions) to be funded primarily by internally generated cash flow, including the sale of its remaining marketable securities. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, the Company would have had (i) approximately $50.9 million of cash and marketable securities, (ii) no long-term debt other than the Outstanding Notes and (iii) $80.0 million of borrowing capacity available under the Credit Agreement. The Company currently intends to make use of its excess cash, its marketable securities and its available borrowing capacity to implement its growth strategy. 52 PRINCIPAL OIL AND GAS PROPERTIES The following table summarizes certain information with respect to each of the Company's principal areas of operation at December 31, 1996:
PROVED RESERVES ---------------------------------- 1996 TOTAL TOTAL PERCENT AVERAGE GROSS OIL NATURAL PROVED OF TOTAL NET OIL AND AND NGLS GAS RESERVES PROVED PRODUCTION GAS WELLS(1) (MBBLS) (MMCF) (MBOE) RESERVES (BOE/DAY) ------------ -------- ------- -------- -------- ---------- Permian Basin Maljamar.............. 223 14,706 6,248 15,748 31% 2,074 Wellman............... 14 7,067 2,494 7,482 15% 1,594 Dimmitt/Slash Ranch... 59 2,548 12,954 4,707 9% 848 Other................. 281 1,290 11,490 3,205 7% 1,380 ----- ------ ------- ------ --- ------ Total Permian Basin.............. 577 25,611 33,186 31,142 62% 5,896 Appalachian Basin....... 443 989 31,633 6,260 12% 1,343 San Juan Basin.......... 2,200 48 20,831 3,520 7% 1,104 Other(2)................ 261 1,432 3,896 2,082 4% 1,281 ----- ------ ------- ------ --- ------ Total United States............. 3,481 28,080 89,546 43,004 85% 9,624 Canada.................. 287 3,532 23,831 7,504 15% 3,318 ----- ------ ------- ------ --- ------ Total Company....... 3,768 31,612 113,377 50,508 100% 12,942 ===== ====== ======= ====== === ======
- -------- (1) During the first quarter of 1997, a total of 49 additional gross oil and gas wells were placed on production at the Company's properties. (2) Includes properties located in Michigan which were sold in February and April 1997 for an aggregate price of $2.3 million. The Company's Michigan properties included 24,000 gross (9,300 net) leasehold acres and 12 gross (two net) productive oil wells. These properties contained 931 MBOE of the Company's total proved reserves at December 31, 1996, and the Company's net production from these properties averaged 479 BOE per day in 1996. Permian Basin Maljamar. The Company's Maljamar properties are situated in Southeast New Mexico. At December 31, 1996, the Maljamar properties contained 15.7 MMBOE of proved reserves, which represented 31% of the Company's total proved reserves and 30% of the Company's Present Value of total proved reserves. The Maljamar properties consist of three producing units acquired by the Company in separate transactions between 1992 and 1995: the Maljamar Grayburg and Caprock Maljamar Units, both of which are in Lea County, New Mexico, and the Skelly Unit in Eddy County, New Mexico. The Maljamar Grayburg Unit produces from the Grayburg and San Andres formations at depths ranging from 3,800 to 4,500 feet, and the Caprock Maljamar Unit produces from the same formations at depths ranging from 4,000 to 5,000 feet. The Skelly Unit is located approximately five miles west of the two Lea County units and produces from the Seven Rivers, Grayburg and San Andres formations at depths ranging from 2,100 to 4,000 feet. The Company has a 100% working interest in each of these units, which have been combined into a single large scale waterflood project encompassing approximately 11,800 gross leasehold acres. Exploitation efforts at the project include recompletions of existing wells and the drilling of infill development wells on 20-acre spacing to create a five-spot water injection pattern of 40 acres. From June 1, 1993 through December 31, 1996, the Company made capital expenditures of $50.1 million and completed 113 producing wells at the project. At December 31, 1996, the project included 223 producing wells and 102 water injection wells, all of which were operated by the Company. During 53 1996, Wiser placed a total of 68 wells on production, and had 33 additional wells in various stages of drilling or completion at year end. At December 31, 1996, a total of 28 wells remained to be drilled at the project, eight of which have been completed as of May 31, 1997 and the remainder of which are expected to be drilled in 1997 as part of a total capital expenditure thereon of $17.4 million. The Company's average daily net production from the Maljamar properties increased to 2,800 Bbls of oil and 1,760 Mcf of natural gas in December 1996 from 580 Bbls of oil and 220 Mcf of natural gas in January 1993 (on a pro forma combined basis, assuming the Company had acquired all three units at January 1, 1993). The Company's net production from the Maljamar properties averaged 1,900 Bbls of oil and 1,044 Mcf of natural gas per day in 1996. The Company's cumulative net production from the Maljamar properties since acquired by the Company has been 1,360 MBbls of oil and 670 MMcf of natural gas through December 31, 1996. Wellman Unit. In 1993 the Company acquired a 62% working interest in and became operator of the Wellman Unit in Terry County, Texas, located in the northwestern edge of the Horseshoe Atoll. At December 31, 1996, the Company's Wellman property contained 7.5 MMBOE of proved reserves, which represented 15% of the Company's total proved reserves and 14% of the Company's Present Value of total proved reserves. The Company owns approximately 2,300 gross (1,400 net) leasehold acres in the Wellman Unit. The Wellman Unit produces oil from the Wolfcamp Reef formation at depths ranging from 9,100 to 10,000 feet. Water injection at the unit began in 1979, and CO/2/ injection began in 1983. The unit also includes a gas processing plant, which processes wellhead gas produced from the unit. Wiser's interest in this plant is proportionate to its working interest in the Wellman Unit. Processing at the plant involves subjecting the wellhead gas to high pressure and low temperature treatments that cause the gas to separate into various products, including NGLs, residual natural gas and CO/2/. The NGLs and residual natural gas are sold to pipeline companies, and the CO/2/ is reinjected into the unit's reservoir. At December 31, 1996, the unit included 14 productive wells, three water injection wells and three CO/2/ injection wells, all of which were operated by the Company. The Company's net production from the Wellman Unit averaged 1,051 Bbls of oil, 483 Bbls of NGLs and 374 Mcf of natural gas per day in 1996. The Company's average daily net production from the unit was 927 Bbls of oil, 440 Bbls of NGLs and 547 Mcf of natural gas in December 1996, which was 8% lower on an equivalent unit basis than the average daily net production from the unit in 1996. This reduction was due primarily to weather-related delays in drilling operations and plant processing and shortages of available drilling rigs. The Company's cumulative net production from the unit since acquired by the Company has been 1,181 MBbls of oil, 278 MBbls of NGLs and 137 MMcf of natural gas through December 31, 1996. In 1994 the Company began reconditioning the gas processing plant at the Wellman Unit to enhance the extraction of NGLs and residual natural gas from the wellhead gas. The Company completed the reconditioning project in June 1995 at a total cost of approximately $6.0 million. Following completion of this project, average daily net production from the unit increased to 1,180 Bbls of oil and 527 Bbls of NGLs during the six months ended December 31, 1995 from 982 Bbls of oil and no NGLs for the six months ended June 30, 1995. For the year ended December 31, 1996, the gas plant processed an average of 31 MMcf of gross natural gas and CO/2/ per day and recovered an average of 885 Bbls of NGLs and 685 Mcf of residual natural gas per day. During November and December 1996, the plant operated at an average of 95% of its maximum capacity of 35 MMcf of gas per day. Dimmitt/Slash Ranch Fields. The Company's Dimmitt/Slash Ranch properties are situated in Loving County, Texas, 80 miles west of Midland, Texas. At December 31, 1996, the Dimmitt/Slash Ranch properties contained 4.7 MMBOE of proved reserves, which represented 9% of the Company's total proved reserves and 11% of the Company's Present Value of total proved reserves. 54 The Company owns approximately 5,400 gross (4,100 net) leasehold acres in the Dimmitt Field, and has working interests in this acreage ranging from 50% to 100%. The Company acquired its initial interest in and became operator of the field in 1993. The Dimmitt Field produces oil and gas from the Cherry Canyon and Bell Canyon formations at depths ranging from 4,700 to 6,700 feet. At December 31, 1996, the field included 56 productive wells. The Company completed two wells in the Cherry Canyon formation and performed recompletions on seven producing wells in the Bell Canyon formation in 1996. The Company plans to drill two additional development wells in the Cherry Canyon formation and to recomplete 13 additional Bell Canyon wells during 1997 for an estimated total capital expenditure of approximately $1.6 million. The Company's net production from the Dimmitt Field averaged 374 Bbls of oil and 1,172 Mcf of natural gas per day in 1996. The Slash Ranch Field is a natural gas field that underlies the Dimmitt Field. The Company owns approximately 2,600 gross (1,800 net) leasehold acres in the Slash Ranch Field. The Slash Ranch Field produces from the Atoka, Fusselman and Ellenburger formations at depths ranging from 15,000 to 20,000 feet. At December 31, 1996, the field included three producing wells, all of which were operated by the Company. The Company's working interests in these wells range from 34% to 100%. The Company's net production from the Slash Ranch Field averaged 1,672 Mcf of natural gas per day in 1996. The Company has identified several exploratory prospects in this field and intends to further define these prospects with 3-D seismic in 1997. See "--Exploration Activities--United States--West Texas." The Company's net production from the Dimmitt/Slash Ranch properties averaged 374 Bbls of oil and 2,844 Mcf of natural gas per day in 1996. The Company's cumulative net production from the properties since acquired by the Company has been 326 MBbls of oil and 3.4 Bcf of natural gas through December 31, 1996. Appalachian Basin The Company's Appalachian Basin properties are situated in Kentucky, Tennessee and West Virginia. At December 31, 1996, these properties contained 6.3 MMBOE of proved reserves, which represented 12% of the Company's total proved reserves and 12% of the Company's Present Value of total proved reserves. The Appalachian Basin reserves are long-lived reserves (generally, over 40 years) characterized by gradual decline rates. The Company has operated in Kentucky and Tennessee since 1917 and owns approximately 123,000 gross (108,000 net) leasehold acres in 22 shallow natural gas fields in southeastern Kentucky and northeastern Tennessee. The Company's working interests in this acreage range from 33% to 100%. The Company has a 100% working interest in approximately 90% of the total acreage. The primary producing formations in these fields are the Maxon, Big Lime and Corniferous at a maximum depth of less than 3,000 feet. At December 31, 1996, the Company owned 368 gross (309 net) productive wells in these fields, of which approximately 98% were operated by the Company. Although daily production from individual wells in the fields is low (on average, 30 Mcf per day), the production generally receives a higher sales price than the Company's other natural gas production because of the proximity of the fields to the northeastern United States gas markets. The Company completed four development wells in Kentucky and Tennessee in 1996 and two development wells in early 1997. The Company expects to spend approximately $500,000 in 1997 to drill four additional development wells in Kentucky and Tennessee. The Company's net production from its Kentucky and Tennessee properties averaged 5,346 Mcf of natural gas per day in 1996. The Company owns approximately 20,000 gross (14,000 net) leasehold acres in the Blue Creek Field in Clay and Kanawha Counties, West Virginia. The Company has an average 70% working interest in this acreage, which it acquired in February 1995. The Blue Creek Field produces from the Rosedale, Injun, Keener and Weir formations, ranging from depths of 1,200 to 2,800 feet. At December 55 31, 1996, the Company owned 75 gross (48 net) productive gas wells in this field, all of which were operated by another company. During 1996, the Company participated in the drilling of 12 gross (nine net) development wells in the Blue Creek Field. The Company has identified 35 exploratory drilling locations in the field, of which five have been drilled and an additional 15 are expected to be drilled in 1997 for an estimated total capital expenditure of $2.5 million. The Company's net production from its West Virginia properties averaged 913 Mcf of natural gas, 104 Bbls of oil and 193 Bbls of NGLs per day in 1996. The Company owns and operates an extensive natural gas gathering and transportation system located in its producing areas of Kentucky and Tennessee. The system consists of approximately 340 miles of gas gathering pipelines, 16 gas compressor stations, two gas processing plants and two gas storage reservoirs. The pipelines have a throughput capacity of approximately 20 MMcf of natural gas per day. During the year ended December 31, 1996, the pipelines gathered an average of 8.2 MMcf of natural gas per day. The two processing plants have a total capacity of 16 MMcf of natural gas per day. During the year ended December 31, 1996, the plants processed an average of 8.2 MMcf of natural gas per day and recovered an average of 193 Bbls of NGLs per day. See "--Marketing of Production." The Company's net production from its Appalachian Basin properties averaged 6,259 Mcf of natural gas, 104 Bbls of oil and 193 Bbls of NGLs per day in 1996. San Juan Basin The Company's San Juan Basin properties are located in Rio Arriba County in northwestern New Mexico. At December 31, 1996, the San Juan Basin properties contained 3.5 MMBOE of proved reserves, which represented 7% of the Company's total proved reserves and 7% of the Company's Present Value of total proved reserves. The Company owns approximately 11,100 gross (5,300 net) leasehold acres in the San Juan Basin. The Company's average 48% working interest in the acreage was contributed in connection with a unitization of the wells in the San Juan Basin fields in the 1950's, resulting in the ownership by the Company of small non-operated working interests in the wells. At December 31, 1996, the Company owned working interests in 2,200 producing gas wells in the San Juan Basin, which working interests ranged from 0.21% to 4.2% and averaged approximately 1.8%. The Company's San Juan Basin properties produce from multiple formations ranging from depths of 3,500 feet to 8,000 feet. The Company's net production from these properties averaged 6,539 Mcf of natural gas and 14 Bbls of oil per day in 1996. During the year ended December 31, 1996, approximately 50% of the Company's net production from these properties was from the Fruitland Coal seams. Such production generates nonconventional fuels income tax credits for Wiser under Section 29 of the Internal Revenue Code of 1986, as amended. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations." In 1996 production from the San Juan Basin properties was diminished as a result of a five-month curtailment due to a pipeline rupture. The Company expects that future development of the properties will depend on natural gas prices, and that its share of the costs of any such future development activities will not be significant. Other U.S. Properties The Company's other United States properties include properties located in the Anadarko Basin in Texas and Oklahoma and the Gulf Coast onshore region. The Company intends to develop its Anadarko Basin and Gulf Coast properties as new core operating areas if certain exploration projects it is currently pursuing prove successful. See "--Exploration Activities--United States." Canada In June 1994, Wiser established an important new core area with the completion of a $52.0 million acquisition of Canadian oil and gas properties from Eagle Resources, Ltd. The purchase included 7.2 56 MMBOE of proved reserves and 2.8 MMBOE of probable reserves, approximately 127,000 net undeveloped acres, seven exploration prospects and an existing staff of 23 persons. At December 31, 1996, the Company's Canadian properties contained 7.5 MMBOE of proved reserves, which represented 15% of the Company's total proved reserves and 15% of the Present Value of the Company's total proved reserves. The following table summarizes certain information with respect to each of the Company's principal Canadian areas of operation at December 31, 1996:
PROVED RESERVES --------------------------------- PERCENT OF TOTAL TOTAL PERCENT OF 1996 AVERAGE TOTAL GROSS PROVED CANADIAN TOTAL COMPANY NET OIL AND RESERVES PROVED PROVED PRODUCTION GAS WELLS(1) (MBOE) RESERVES RESERVES (BOE/DAY) ------------ -------- ---------- ------------- ------------ Evi................ 15 1,224 16% 2.4% 825 Provost............ 46 616 8% 1.2% 742 Grande Prairie..... 16 884 12% 1.8% 239 Leahurst........... 16 355 5% 0.7% 356 Pine Creek......... 5 420 6% 0.8% 239 Other.............. 189 4,005 53% 8.0% 917 --- ----- --- ---- ----- Total Canada..... 287 7,504 100% 14.9% 3,318 === ===== === ==== =====
- -------- (1) During the first quarter of 1997, a total of six additional gross oil and gas wells were placed on production at the Company's Canadian properties. Evi. The Company's Evi Field is located approximately 400 miles north of Calgary. At December 31, 1996, the Evi Field contained 1,224 MBOE of proved reserves, which represented 16% of the Company's total Canadian proved reserves and 35% of the Present Value of the Company's total Canadian proved reserves. The Company owns approximately 5,440 gross (1,870 net) leasehold acres in the Evi Field, and has an average 34% working interest in this acreage. The Evi Field produces oil from the Granite Wash formation at depths ranging from 4,900 to 5,000 feet. The Company's net production from the Evi Field averaged 825 Bbls of oil per day in 1996. At December 31, 1996, the Company owned 15 gross (3.2 net) productive wells and two gross (0.4 net) water disposal wells in the field, of which 12 productive wells and both water disposal wells were operated by Wiser. Provost. The Company's Provost properties are located approximately 210 miles northeast of Calgary. At December 31, 1996, the Provost properties contained 616 MBOE of proved reserves, which represented 8% of the Company's total Canadian proved reserves and 11% of the Present Value of the Company's total Canadian proved reserves. The Company owns approximately 9,280 gross (6,300 net) leasehold acres in the Provost properties, and has an average 68% working interest in this acreage. The Provost properties produce mainly from the Dina formation at depths of 3,070 to 3,170 feet. The Provost Dina "X' Pool is the Company's main producing pool in these properties. Water injection in this pool began in 1990. The Company drilled 12 infill wells in the Dina "X' Pool in 1996. This increased the Company's average daily net production from the pool to 630 Bbls of oil in December 1996 from 150 Bbls of oil in January 1996. The Company drilled two additional infill wells in the pool in the first half of 1997. In addition, the Company drilled a new discovery well and a follow-up development well in the Provost area in the first half of 1997. Further drilling of the new discovery in Provost is contingent upon production results from these two wells. 57 The Company's net production from the Provost properties averaged 679 Bbls of oil and 380 Mcf of natural gas per day in 1996. At December 31, 1996, the Company owned 46 gross (35.8 net) productive wells and two gross (two net) water injection wells on the properties, of which 29 gross productive wells and both water injection wells were operated by the Company. The Company has a 100% working interest in 22 of the productive wells and a 92% working interest in one of the others. Grande Prairie. The Company's Grande Prairie properties are located approximately 380 miles northwest of Calgary. At December 31, 1996, the Grande Prairie properties contained 884 MBOE of proved reserves, which represented 12% of the Company's total Canadian proved reserves and 11% of the Present Value of the Company's total Canadian proved reserves. The Company owns approximately 8,320 gross (2,260 net) leasehold acres in the Grande Prairie properties, and has an average 27% working interest in this acreage. The Grande Prairie properties produce from the Halfway formation at depths of 6,200 to 6,300 feet. At December 31, 1996, the Company owned 16 gross (3.9 net) productive wells and one gross (0.23 net) gas injection well at Grande Prairie, all of which were operated by Wiser. All but one well has been unitized in the Grande Prairie Halfway "A' Unit, in which the Company has a 22.9% working interest. Gas re-injection in the unit began in 1989 to enhance oil recovery. The Company's net production from the Grande Prairie properties averaged 158 Bbls of oil and 487 Mcf of natural gas per day in 1996. Leahurst. The Company's Leahurst properties are located approximately 180 miles northeast of Calgary. At December 31, 1996, the Leahurst properties contained 355 MBOE of proved reserves, which represented 5% of the Company's total Canadian proved reserves and 8% of the Present Value of the Company's total Canadian proved reserves. The Company owns approximately 880 gross (560 net) leasehold acres in the Leahurst properties, and has an average 63% working interest in this acreage. The Leahurst properties produce from the Glauconite formation at depths of 4,150 to 4,250 feet. At December 31, 1996, the Company owned 16 gross (2.6 net) productive wells and two gross (0.63 net) water injection wells on the Leahurst properties. All of the wells in the properties have been unitized in the Leahurst Glauconite "B' Unit, in which the Company has a 16% working interest. The unit is operated by a third party. Water injection in the unit began in 1994 to enhance oil recovery. The Company recently completed a six- well infill drilling program at the unit. Five of these wells have proved undeveloped reserves assigned to them. The Company's net production from the Leahurst properties averaged 334 Bbls of oil and 130 Mcf of natural gas per day in 1996. Pine Creek. The Company's Pine Creek Field is located approximately 240 miles northwest of Calgary. At December 31, 1996, the Pine Creek Field contained 420 MBOE of proved reserves, which represented 6% of the Company's total Canadian proved reserves and 4% of the Present Value of the Company's total Canadian proved reserves. The Company owns approximately 8,000 gross (2,100 net) leasehold acres in the Pine Creek Field, and has a 26% working interest in this acreage. The Pine Creek Field produces natural gas from the Bluesky and Gething formations at depths of 8,000 to 8,200 feet. At December 31, 1996, the Company owned five gross (1.3 net) productive wells in the Pine Creek Field, all of which were operated by a third party. The Company's net production from the Pine Creek Field averaged 967 Mcf of natural gas and 78 Bbls of NGLs per day in 1996. Other Canadian Properties. The Company owns interests in approximately 30 other Canadian properties, primarily located in its principal areas of operation. For the year ended December 31, 1996, these properties individually represented less than 5%, and in the aggregate represented approximately 28%, of the Company's average daily net Canadian production. 58 EXPLORATION ACTIVITIES United States. Wiser's domestic exploration program seeks to maintain a balanced portfolio of drilling opportunities that range from lower risk field extension wells to higher risk, high reserve potential prospects. The Company focuses primarily on exploration opportunities that can benefit from advanced technologies, including 3-D seismic, designed to reduce risks and increase success rates. Prospects are developed in-house and through strategic alliances with exploration companies that have expertise in specific target areas. In addition, the Company evaluates some externally generated prospects and participates in farm-ins to enhance its portfolio. In 1996, Wiser participated in three gross (two net) domestic exploration wells, compared with 19 gross (six net) wells in 1995, spending $0.9 million in 1996 and $2.8 million in 1995 on domestic exploration. The Company has budgeted $7.9 million for its 1997 domestic exploration program. The Company is currently focusing its domestic exploration activities in the following geographical areas: West Texas. The Company has identified deeper exploratory prospects in the Slash Ranch Field in Loving County where it is currently producing at shallower depths. The Company intends to define these prospects further with 3-D seismic. In Pecos County, Wiser has a 23.5% working interest in the Indian Mesa prospect and a 47.5% working interest in the Panther Bluff prospect. The Company has completed 3-D seismic on the Indian Mesa prospect and is currently drilling an exploratory well on this prospect. The Company will be carried at no cost to casing point in the well and will have a 23.5% working interest after casing point. The Company has identified unproven drilling potential in the Panther Bluff prospect to be defined further with 3-D seismic data. The Company is in the process of obtaining necessary permits to commence exploration of this prospect. Gulf Coast. The Company plans to develop exploration projects in the Gulf Coast onshore region. The Company intends to seek a mix of moderate risk, moderate cost prospects and some higher cost, higher potential prospects. In the Bison Ridge project in Louisiana, the Company is participating in a proposed 60-square mile 3-D seismic survey and will bear 25% of the survey costs. In the South Lakeside prospect in Cameron Parish, Louisiana, Wiser participated through a 12.5% working interest in an exploratory well that has been plugged and abandoned. In the Tecumseh project in southwest Mississippi and adjacent Louisiana, the Company is operating a 30-square mile 3-D seismic survey. Two wells are planned to be drilled on this acreage in 1997. Wiser would operate the two wells, if drilled, and own a 50% working interest therein. In the Castleberry project in Conecuh County, Alabama, the Company is participating in and operating a proposed 31-square mile 3-D seismic survey and will bear 50% of the survey costs. In the West Double A prospect in Polk County, Texas, the Company owns a 10% working interest in an exploratory well that is currently being completed. Anadarko Basin. The Company owns a 20% working interest in an exploratory well that has been completed in the Lower Morrow sand at its Mustang prospect in Lipscomb County, Texas. Wiser is currently evaluating two other exploratory projects in Oklahoma. The Company is investigating the possibility of conducting 3-D seismic on these two projects to delineate exploratory prospects. Canada. Wiser focuses its Canadian exploration activities in specific regions within the Western Canadian Sedimentary Basin in close proximity to known producing horizons where the potential for significant reserves exists. The Company's technical personnel have considerable experience in this focus area. From the date of the Company's acquisition of its Canadian properties through December 31, 1996, the Company's Canadian exploration activities have resulted in the successful completion of five net wells (out of 14 net wells drilled). The Company has budgeted $4.3 million for its 1997 Canadian exploration program. 59 The Company is currently focusing its Canadian exploration activities in the following geographical areas: Northeast British Columbia. The Company owns approximately 2,760 gross (1,380 net) leasehold acres in the Beatton River/Elm area, and has an average 50% working interest in this acreage. This project targets the Gething formation at 4,000 feet and the Triassic Halfway formation located directly beneath the Gething formation. In the fourth quarter of 1996, the Company drilled an exploratory well on this acreage. This well has been cased and production tested and is currently undergoing pressure build-up analysis to determine the optimum rate of recovery. Based on an analysis of the final flow rates, the Company believes this well has significant reserve potential. If successful, this well will qualify under a provincial program encouraging exploration activity which would exempt the Company from paying royalties on production to the provincial government for a period of 36 months. Another exploratory well and a development well are planned for 1997 to further delineate this field. The Company is currently negotiating an off-setting opportunity for this prospect. Northern Alberta. The Company's Gage project is presently undergoing land assembly as an oil prospect targeting the Triassic formation at approximately 4,000 feet. A number of wells drilled by others in this area have previously tested oil and gas, but have never produced because of a lack of pipelines in the area. The Company is engaged in a shallower competitive venture in this area to determine whether there are sufficient natural gas reserves to justify the construction of production facilities. The Company owns approximately 5,440 gross (3,560 net) leasehold acres in the Gage project and has working interests in the natural gas rights ranging from 50% to 100%. The Company has purchased and intends to continue to purchase the oil rights to this project in private sales from the Province of Alberta. An exploratory well is planned upon completion of land assembly activities. The Company is also developing the Evi West project, targeting the Granite Wash sands located in an area near certain of the Company's production facilities. The Company has completed a detailed 2-D seismic analysis which revealed sands draped over a Precambrian structure at a depth of approximately 5,000 feet. The Company owns a 100% working interest in approximately 640 gross leasehold acres on this project. West Central Alberta. The Company owns approximately 16,000 gross (7,050 net) leasehold acres in the Bronson project with working interests ranging from 50% to 100%. An exploratory well on this acreage has been drilled and cased for further evaluation. A second exploratory well is being completed, and a third well is expected to spud in 1997. Wiser is also producing natural gas from the shallower Cardium formation. The Company owns approximately 1,920 gross (960 net) leasehold acres in the Ferrier prospect, and has a 50% working interest in this acreage. Based on a 2-D seismic analysis of this area, the Company drilled an exploratory well through the Cretaceous and into the Mississippian formations at a depth of approximately 10,000 feet. This well is currently being completed. In addition, the Company has earned working interests ranging from 27.5% to 50% in five sections of adjacent acreage. Plant capacity and infrastructure are currently available in the area. The Company owns approximately 640 gross (213 net) leasehold acres and has a 33% working interest with two equal partners in the Windfall project. A shallow natural gas target has been confirmed, and Wiser is currently interpreting 2-D seismic on a second, deeper target. An exploratory test well is expected to spud during the third quarter of 1997. The Company has secured a farm-in of 480 acres of land in the Provost area. An exploratory well targeting the Cretaceous formation at approximately 4,200 feet is currently being completed. Other International Projects. The Company has budgeted approximately $800,000 for 1997 capital expenditures in connection with possible exploration activities in Peru. The Company is currently negotiating a participation agreement with certain third parties pursuant to which it would acquire a 12.5% non-operated working interest in an exploration license in Peru. 60 MARKETING OF PRODUCTION The Company markets its production of oil, natural gas and NGLs to a variety of purchasers, including large refiners and resellers, pipeline affiliate marketers, independent marketers, utilities and industrial end-users. To help manage the impact of potential price declines, Wiser has developed a portfolio of long- and short-term contracts with prices that are either fixed or related to market conditions in varying degrees. Most of the Company's production is sold pursuant to contracts that provide for market-related pricing for the areas in which the production is located. During the year ended December 31, 1996, revenues from the sale of production to Highland Energy Company, Koch Oil Co. Ltd. and Texaco Trading and Transportation represented approximately 35%, 18% and 15%, respectively, of the Company's total oil and gas revenues. The sales to Koch Oil Co. Ltd. accounted for approximately 75% of the Company's revenues from sales of its Canadian production in 1996. The Company believes it would be able to locate alternate purchasers in the event of the loss of any one or more of these purchasers, and that any such loss would not have a material adverse effect on the Company's financial condition or results of operations. Crude Oil. The Company sells its crude oil and condensate to various refiners and resellers in the United States and Canada at posting-related and spot-related prices that also depend on factors such as well location, production volume and product quality. The Company typically sells its crude oil and condensate production at or near the well site, although in some cases it is gathered by the Company or others and delivered to a central point of sale. The Company's crude oil and condensate production is transported by truck or by pipeline and is typically committed to arrangements having a term of one year or less. The Company has not engaged in crude oil trading activities. Revenue from the sale of crude oil and condensate totaled $45.6 million for the year ended December 31, 1996 and represented 63% of the Company's total oil and gas revenues for that period. From time to time, the Company enters into crude oil price hedges to reduce its exposure to commodity price fluctuation. At December 31, 1996, approximately 41% of the Company's total expected crude oil production through December 1997 was hedged under such arrangements at a weighted average volume of 3,496 Bbls of oil per day and at a weighted average hedge floor price of $16.39 per Bbl and a weighted average hedge ceiling price of $19.06 per Bbl. See "Risk Factors--Risk of Hedging Activities," "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Matters" and Note 1 to the Company's Consolidated Financial Statements included elsewhere in this Prospectus. Natural Gas. The Company sells its produced and gathered natural gas to utilities, marketers, processor/resellers and industrial end-users primarily under market-sensitive, long-term contracts or daily, monthly or multi-month spot agreements. An insignificant amount of the Company's natural gas is committed to long-term, fixed-price sales agreements. To accomplish the delivery and sale of certain of its natural gas, the Company has entered into long-term agreements with various natural gas gatherers that deliver its gas to points of sale on major transmission pipelines. In Kentucky and Tennessee, the Company owns and operates an extensive natural gas gathering and transportation system consisting of approximately 340 miles of pipeline, 16 gas compressor stations, two gas processing plants and two gas storage reservoirs. The Company utilizes this system to procure, aggregate and deliver natural gas produced from over 260 wells that are owned and operated by the Company, comprising most of its Appalachian Basin natural gas production, together with natural gas produced from wells owned and operated by others, in meeting its delivery obligations under a sales contract with a local utility. This sales contract, which expires on October 31, 1999, provides for market-related pricing plus payment of a stated standby demand charge based on an established peak-day delivery obligation. The maximum daily volume of natural gas that the utility may demand is subject to annual adjustment (never to exceed 12,000 Mcf per day) and currently is fixed at 61 11,000 Mcf per day. For the year ended December 31, 1996, approximately 10% of the Company's total natural gas production was sold under this sales contract. The Company also utilizes its Kentucky/Tennessee gathering and transportation system to transport natural gas on behalf of third parties and natural gas purchased from third parties for resale. The Company believes that it has sufficient production from its properties, and from those of others tied to its gathering and transportation system, to meet the Company's delivery obligations under its existing natural gas sales contracts. Although the Company has not entered into financial transactions to hedge the price of its estimated future natural gas production for 1997 or beyond, it may consider various hedging arrangements in the future. NGLs. From its natural gas processing plants in West Texas and Kentucky, the Company sells NGLs to independent marketers for resale. A direct pipeline connection to the Texas Gulf Coast market area facilitates the sale of NGLs from the Company's Wellman Unit, and enables the Company to receive prices that are representative of the daily market value of NGLs on the Texas Gulf Coast, less transportation and fractionation costs. The market for NGLs in Kentucky is less competitive with higher transportation costs in that region due to the absence of product pipelines. The Company's weighted average price in 1996 for NGLs sold from Company-operated plants or under processing agreements with others was $13.36 per Bbl. At December 31, 1996, approximately 40% of the Company's total expected NGL production from January 1 through March 31, 1997 was hedged at a weighted average swap price of $18.76 per Bbl. Prices for NGLs attributable to natural gas sold to plants operated by others are generally included in the prices reported by the Company for the sale of its natural gas. Price Considerations. Crude oil prices are established in a highly liquid, international market, with average crude oil prices received by the Company generally fluctuating with changes in the futures price established on the NYMEX for West Texas Intermediate Crude Oil ("NYMEX-WTI"). The average crude oil price per Bbl received by the Company in 1996 was $18.81, compared to an average price per Bbl of $20.86 that would have been received before the effects of the Company's hedging activities. The average NYMEX-WTI closing price per Bbl for 1996 was $22.01. Natural gas prices in each of the geographical areas in which the Company operates are closely tied to established price indices which are heavily influenced by national and regional supply and demand factors and the futures price per MMBtu for natural gas delivered at Henry Hub, Louisiana established on the NYMEX ("NYMEX-Henry Hub"). At times, these indices correlate closely with the NYMEX-Henry Hub price, but often, as in early 1996, there are significant variances between the NYMEX-Henry Hub price and the indices used to price the Company's natural gas. Average natural gas prices received by Wiser in each of its operating areas generally fluctuate with changes in these established indices. The average natural gas price per Mcf received by the Company in 1996 was $1.77, compared to an average price per Mcf of $1.92 that would have been received before the effects of the Company's hedging activities. The NYMEX-Henry Hub price per MMBtu for 1996, as represented by the annual average of the closing price on the last three trading days for the prompt month NYMEX natural gas futures contract applicable to each month in 1996, was $2.55. The average natural gas price received by the Company in 1996 was lower than such 1996 NYMEX-Henry Hub price as a result of pricing differentials determined by the location of the Company's natural gas production relative to the Henry Hub trading point, lower natural gas prices generally applicable to Canadian natural gas production relative to U.S. production and the Company's hedging activities. See "Risk Factors--Volatility of Oil and Gas Prices." 62 OIL AND GAS RESERVES The following table sets forth the proved developed and undeveloped reserves of the Company at December 31, 1996:
OIL AND NGLS (MBBLS) NATURAL GAS (MMCF) TOTAL RESERVES (MBOE) ---------------------------- ----------------------------- ---------------------------- DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL DEVELOPED UNDEVELOPED TOTAL --------- ----------- ------ --------- ----------- ------- --------- ----------- ------ Permian Basin Maljamar............... 11,914 2,792 14,706 5,266 982 6,248 12,792 2,956 15,748 Wellman................ 7,067 -- 7,067 2,494 -- 2,494 7,482 -- 7,482 Dimmitt/Slash Ranch.... 2,191 357 2,548 12,276 678 12,954 4,237 470 4,707 Other.................. 1,273 17 1,290 10,662 828 11,490 3,050 155 3,205 ------ ----- ------ ------- ------ ------- ------ ----- ------ Total Permian Basin.... 22,445 3,166 25,611 30,698 2,488 33,186 27,561 3,581 31,142 Appalachian Basin....... 967 22 989 26,173 5,460 31,633 5,328 932 6,260 San Juan Basin.......... 48 -- 48 20,358 473 20,831 3,442 78 3,520 Other................... 1,432 -- 1,432 3,423 473 3,896 2,003 79 2,082 ------ ----- ------ ------- ------ ------- ------ ----- ------ Total United States.... 24,892 3,188 28,080 80,652 8,894 89,546 38,334 4,670 43,004 Canada.................. 3,225 307 3,532 22,477 1,354 23,831 6,971 533 7,504 ------ ----- ------ ------- ------ ------- ------ ----- ------ Total Company.......... 28,117 3,495 31,612 103,129 10,248 113,377 45,305 5,203 50,508 ====== ===== ====== ======= ====== ======= ====== ===== ======
The following table summarizes the Company's proved reserves, the estimated future net revenues from such proved reserves and the Present Value and Standardized Measure of Discounted Future Net Cash Flows attributable thereto at December 31, 1996, 1995 and 1994:
AT DECEMBER 31, ----------------------------- 1996 1995 1994 --------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT FOR WEIGHTED AVERAGE SALES PRICES) Proved reserves: Oil and NGLs (MBbl)......................... 31,612 32,208 23,430 Natural gas (MMcf).......................... 113,377 109,915 107,920 Oil equivalents (MBOE)..................... 50,508 50,527 41,417 Estimated future net revenues before income taxes...................................... $ 705,723 $ 401,037 $ 272,776 Present Value............................... $ 414,314 $ 235,416 $ 160,804 Standardized Measure of Discounted Future Net Cash Flows(1).......................... $ 317,180 $ 194,602 $ 142,032 Proved developed reserves: Oil and NGLs (MBbl)......................... 28,117 21,556 18,799 Natural gas (MMcf).......................... 103,129 102,026 98,370 Oil equivalents (MBOE)..................... 45,305 38,560 35,194 Estimated future net revenues before income taxes...................................... $ 631,406 $ 310,034 $ 251,003 Present Value............................... $ 381,169 $ 195,439 $ 155,642 Weighted average sales prices: Oil (per Bbl)............................... $ 24.63 $ 18.19 $ 16.11 Natural gas (per Mcf)....................... 3.45 1.84 1.57 NGLs (per Bbl).............................. 19.79 12.87 9.80
- -------- (1) The Standardized Measure of Discounted Future Net Cash Flows prepared by the Company represents the present value (using an annual discount rate of 10%) of estimated future net revenues from the production of proved reserves, after giving effect to income taxes. See the Supplemental Financial Information attached to the Consolidated Financial Statements of the Company included elsewhere in this Prospectus for additional information regarding the disclosure of the Standardized Measure information in accordance with the provisions of Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and Gas Producing Activities." 63 All information set forth in this Prospectus relating to the Company's proved reserves, estimated future net revenues and Present Values is taken from reports prepared by DeGolyer and MacNaughton (with respect to the Company's United States properties) and Gilbert Lausten Jung Associates Ltd. (with respect to the Company's Canadian properties), each of which is a firm of independent petroleum engineers. The estimates of these engineers were based upon review of production histories and other geological, economic, ownership and engineering data provided by the Company. No reports on the Company's reserves have been filed with any federal agency. In accordance with SEC guidelines, the Company's estimates of proved reserves and the future net revenues from which Present Values are derived are made using year end oil and gas sales prices held constant throughout the life of the properties (except to the extent a contract specifically provides otherwise). The prices of oil and gas at December 31, 1996 used to estimate the Company's proved reserves and the future net revenues from which Present Value is derived were substantially higher than the prices used in previous years to make such estimates and substantially higher than oil and gas prices at May 30, 1997. The closing price on the NYMEX for the prompt month futures contract for delivery of West Texas Intermediate Crude Oil on December 31, 1996 and May 30, 1997 was $25.92 and $20.88 per Bbl, respectively. The closing price on the NYMEX for the prompt month futures contract for natural gas delivered at Henry Hub, Louisiana on December 31, 1996 and May 30, 1997 was $2.76 and $2.23 per MMBtu, respectively. A decline in prices relative to year end 1996 could cause a significant decline in the Present Value attributable to the Company's proved reserves at December 31, 1996. For example, a $1.00 decline in oil and NGL prices, holding all other variables constant, would decrease such Present Value by 4%, or $14.8 million, and a $0.10 decline in natural gas prices, holding all other variables constant, would decrease such Present Value by 1%, or $5.1 million. See "Risk Factors--Uncertainty of Estimates of Reserves and Future Net Revenues." Operating costs, development costs and certain production-related taxes were deducted in arriving at estimated future net revenues, but such costs do not include debt service, general and administrative expenses and income taxes. There are numerous uncertainties inherent in estimating oil and gas reserves and their values, including many factors beyond the Company's control. The reserve data set forth in this Prospectus represents estimates only. Reservoir engineering is a subjective process of estimating the sizes of underground accumulations of oil and gas that cannot be measured in an exact manner. The accuracy of any reserve estimate is a function of the quality of available data, engineering and geological interpretation, and judgment. As a result, estimates of different engineers, including those used by the Company, may vary. In addition, estimates of reserves are subject to revision based upon actual production, results of future development, exploitation and exploration activities, prevailing oil and gas prices, operating costs and other factors, which revisions may be material. Accordingly, reserve estimates are often different from the quantities of oil and gas that are ultimately recovered and are highly dependent upon the accuracy of the assumptions upon which they are based. There can be no assurance that these estimates are accurate predictions of the Company's oil and gas reserves or their values. Estimates with respect to proved reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history will result in variations, which may be substantial, in the estimated reserves. See "Risk Factors--Uncertainty of Estimates of Reserves and Future Net Revenues." 64 NET PRODUCTION, SALES PRICES AND COSTS The following table presents certain information with respect to oil and gas production, prices and costs attributable to all oil and gas property interests owned by the Company for the three-year period ended December 31, 1996 and the quarters ended March 31, 1997 and 1996.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------- ----------------------- 1997 1996 1996 1995 1994 ------ ------ ------- ------- ------- PRODUCTION VOLUMES: Oil (MBbl) United States........................... 523 389 1,732 1,445 1,794 Canada.................................. 164 156 693 635 310 ------ ------ ------- ------- ------- Total Company.......................... 687 545 2,425 2,080 2,104 Natural gas (MMcf) United States (1)....................... 2,566 2,586 9,479 9,418 9,804 Canada.................................. 605 748 2,809 2,753 1,272 ------ ------ ------- ------- ------- Total Company (1)...................... 3,171 3,334 12,288 12,171 11,076 NGLs (MBbl) United States........................... 78 74 301 212 163 Canada.................................. 5 9 50 40 10 ------ ------ ------- ------- ------- Total Company.......................... 83 83 351 252 173 WEIGHTED AVERAGE SALES PRICES (2): Oil (per Bbl) United States........................... $19.88 $17.87 $ 18.91 $ 17.14 $ 15.48 Canada.................................. 18.70 17.03 18.55 16.38 16.32 Total Company.......................... 19.60 17.63 18.81 16.91 15.60 Natural gas (per Mcf) United States (1)....................... $ 2.90 $ 1.81 $ 1.95 $ 1.46 $ 1.79 Canada.................................. 1.47 1.20 1.16 1.05 1.23 Total Company (1)...................... 2.63 1.67 1.77 1.37 1.73 NGLs (per Bbl) United States........................... $14.71 $11.50 $ 12.88 $ 9.67 $ 8.93 Canada.................................. 25.25 23.09 16.21 12.45 10.15 Total Company.......................... 15.29 12.74 13.36 10.11 9.00 SELECTED EXPENSES PER BOE (3): Lease operating United States........................... $ 4.46 $ 4.40 $ 4.53 $ 4.59 $ 4.74 Canada.................................. 3.38 2.65 3.04 2.58 3.22 Total Company.......................... 4.23 3.96 4.14 4.06 4.54 Production taxes (4) United States........................... $ 1.12 $ 0.88 $ 0.93 $ 0.78 $ 0.97 Depreciation, depletion and amortization United States........................... $ 3.50 $ 3.60 $ 3.36 $ 3.63 $ 4.20 Canada.................................. 8.41 6.26 6.49 7.37 6.72 Total Company.......................... 4.54 4.27 4.16 4.62 4.53 General and administrative United States........................... $ 1.78 $ 2.56 $ 2.11 $ 1.99 $ 1.58 Canada.................................. 2.20 1.94 1.61 1.70 1.76 Total Company.......................... 1.87 2.41 1.98 1.92 1.61
- -------- (1) Calculated giving effect to volumes of natural gas purchased for resale as follows: first quarter of 1997--168 MMcf, first quarter of 1996--134 MMcf, 1996--605 MMcf, 1995--500 MMcf and 1994--469 MMcf. (2) Reflects results of hedging activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Other Matters." (3) Calculated without giving effect to volumes of natural gas purchased for resale. (4) Canada does not assess production taxes on revenue derived from oil and gas production from Crown lands. However, in Canada, royalties are payable to the provincial governments on production from Crown lands, subject to certain programs that provide for royalty rate reductions, royalty holidays and tax credits for the purpose of encouraging oil and gas exploration and development. See "--Governmental Regulation--Canada." 65 PRODUCTIVE WELLS AND ACREAGE Productive Wells The following table sets forth the Company's domestic and Canadian productive wells at March 31, 1997:
PRODUCTIVE WELLS -------------------------------- OIL GAS TOTAL --------- ------------ --------- GROSS NET GROSS NET GROSS NET ----- --- ----- --- ----- --- United States.................................. 869 551 2,655(1) 358 3,524 909 Canada......................................... 226 58 67 24 293 82 ----- --- ----- --- ----- --- Total........................................ 1,095 609 2,722 382 3,817 991 ===== === ===== === ===== ===
- -------- (1) 2,200 of the Company's gross natural gas wells are located in the San Juan Basin. The Company has non-operated working interests in these wells ranging from 0.21% to 4.2%. Acreage The following table sets forth the Company's undeveloped and developed gross and net leasehold acreage at December 31, 1996. Undeveloped acreage includes leased acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas, regardless of whether or not such acreage contains proved reserves.
UNDEVELOPED ACRES DEVELOPED ACRES TOTAL ACRES(1) ----------------- --------------- --------------- GROSS NET GROSS NET GROSS NET ----------------- ------- ------- ------- ------- Permian Basin Maljamar.................... 0 0 11,773 11,761 11,773 11,761 Wellman..................... 0 0 2,280 1,432 2,280 1,432 Dimmitt/Slash Ranch......... 480 440 7,487 5,457 7,967 5,897 Other....................... 31,153 5,807 14,431 9,884 45,584 15,691 -------- -------- ------- ------- ------- ------- Total Permian Basin....... 31,633 6,247 35,971 28,534 67,604 34,781 Appalachian Basin............. 26,846 21,195 116,330 100,695 143,176 121,890 San Juan Basin................ 0 0 11,140 5,281 11,140 5,281 Other......................... 31,212 5,132 57,425 14,668 88,637 19,800 -------- -------- ------- ------- ------- ------- Total United States....... 89,691 32,574 220,866 149,178 310,557 181,752 Canada........................ 166,487 74,595 56,919 21,051 223,406 95,646 -------- -------- ------- ------- ------- ------- Total Company............. 256,178 107,169 277,785 170,229 533,963 277,398 ======== ======== ======= ======= ======= =======
- -------- (1) Excluded is acreage in which the Company's interest is limited to a mineral or royalty interest. At December 31, 1996, the Company held mineral or royalty interests in 227,180 gross (31,465 net) developed acres and 1,371,809 gross (203,346 net) undeveloped acres. 66 All the leases for the undeveloped acreage summarized in the preceding table will expire at the end of their respective primary terms unless prior to that date the existing leases are renewed or production has been obtained from the acreage subject to the lease, in which event the lease will remain in effect until the cessation of production. The following table sets forth the minimum remaining lease terms for the gross and net undeveloped acreage:
ACRES EXPIRING --------------- GROSS NET ------- ------- Twelve Months Ending: December 31, 1997.......................................... 35,579 10,840 December 31, 1998.......................................... 30,874 8,657 Thereafter................................................. 189,725 87,672 ------- ------- Total.................................................... 256,178 107,169 ======= =======
As is customary in the industry, the Company generally acquires oil and gas acreage without any warranty of title except as to claims made by, through or under the transferor. Although the Company has title to developed acreage examined prior to acquisition in those cases in which the economic significance of the acreage justifies the cost, there can be no assurance that losses will not result from title defects or from defects in the assignment of leasehold rights. In many instances, title opinions may not be obtained if in the Company's judgment it would be uneconomical or impractical to do so. DRILLING ACTIVITY The following table sets forth for the three-year period ended December 31, 1996 and the three-month period ended March 31, 1997, the number of exploratory and development wells drilled and completed by or on behalf of the Company.
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ----------------------------- 1997 1996 1995 1994 --------- --------- --------- --------- GROSS NET GROSS NET GROSS NET GROSS NET ----- --- ----- --- ----- --- ----- --- Exploratory Wells: United States Producing........................ 0 0 1 1 9 3 4 1 Dry.............................. 0 0 2 1 10 3 7 2 Canada Producing........................ 4 2 1 1 3 2 3 2 Dry.............................. 1 1 6 4 4 2 7 3 Development Wells: United States Producing........................ 35 32 93 85 48 27 34 15 Dry.............................. 0 0 2 1 2 2 6 2 Canada Producing........................ 13 4 21 15 4 2 1 0 Dry.............................. 3 2 5 3 2 2 1 0 Total Wells: Producing........................ 52 38 116 102 64 34 42 18 Dry.............................. 4 3 15 9 18 9 21 7 --- --- --- --- --- --- --- --- Total.......................... 56 41 131 111 82 43 63 25 === === === === === === === ===
67 OPERATIONS The Company generally seeks to be named as operator for wells in which it has acquired a significant interest, although, as is common in the industry, this typically occurs only when the Company owns the major portion of the working interest in a particular well or field. At December 31, 1996, the Company operated 100% of its Maljamar (223 gross wells), Wellman (14 gross wells) and Dimmitt/Slash Ranch (59 gross wells) properties, which comprised approximately 55% of the Company's total proved reserves. At December 31, 1996, the Company owned 368 gross wells on its Kentucky and Tennessee properties, of which approximately 98% were operated by the Company. At that same date, the Company also operated 82 (out of a total of 287) gross wells on its Canadian properties. As operator, the Company is able to exercise substantial influence over the development and enhancement of a well and to supervise operation and maintenance activities on a daily basis. The Company does not conduct the actual drilling of wells on properties for which it acts as operator, but engages independent contractors who are supervised by the Company. The Company employs petroleum engineers, geologists and other operations and production specialists who strive to improve production rates, increase reserves and/or lower the cost of operating its oil and gas properties. Oil and gas properties are customarily operated under the terms of a joint operating agreement, which provides for reimbursement of the operator's direct expenses and monthly per-well supervision fees. Per-well supervision fees vary widely depending on the geographic location and producing formation of the well, whether the well produces oil or gas and other factors. Such fees received by the Company in 1996 ranged from $95 to $870 per well per month. COMPETITION The oil and gas industry is highly competitive. The Company encounters competition from other oil and gas companies in all areas of its operations, including the acquisition of producing properties. The Company's competitors include major integrated oil and gas companies and numerous independent oil and gas companies, individuals and drilling and income programs. Many of its competitors are large, well established companies with substantially larger operating staffs and greater capital resources than the Company. Such companies may be able to pay more for productive oil and gas properties and exploratory prospects and to define, evaluate, bid for and purchase a greater number of properties and prospects than the Company's financial or human resources permit. The Company's ability to acquire additional properties and to discover reserves in the future will depend upon its ability to evaluate and select suitable properties and to consummate transactions in a highly competitive environment. See "Risk Factors--Replacement and Expansion of Reserves," "--Competition" and "--Substantial Capital Requirements." DRILLING AND OPERATING RISKS Drilling activities are subject to many risks, including the risk that no commercially productive oil or gas reservoirs will be encountered. There can be no assurance that new wells drilled by the Company will be productive or that the Company will recover all or any portion of its investment. Drilling for oil and gas may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. The cost of drilling, completing and operating wells is often uncertain. The Company's drilling operations may be curtailed, delayed or canceled as a result of a variety of factors, many of which are beyond its control, including economic conditions, mechanical problems, pressure or irregularities in formations, title problems, weather conditions, compliance with governmental requirements and shortages in or delays in the delivery of equipment and services. Such equipment shortages and delays sometimes involve drilling rigs, especially in Canada, where weather conditions result in a short 68 drilling season, causing a high demand for rigs by a large number of companies during a relatively short period of time. The Company's future drilling activities may not be successful. Lack of drilling success could have a material adverse effect on the Company's financial condition and results of operations. In addition, the Company's use of 3-D seismic requires greater pre-drilling expenditures than traditional drilling strategies. Although the Company believes that its use of 3-D seismic will increase the probability of success of its exploratory wells and should reduce average finding costs through the elimination of prospects that might otherwise be drilled solely on the basis of 2-D seismic and other traditional methods, unsuccessful wells are likely to occur. The Company's operations are subject to all the hazards and risks normally incident to the development, exploitation, production and gathering of, and the exploration for, oil and gas, including unusual or unexpected geologic formations, pressures, downhole fires, mechanical failures, blowouts, cratering, explosions, uncontrollable flows of oil, gas or well fluids and pollution and other environmental risks. These hazards could result in substantial losses to the Company due to injury and loss of life, severe damage to and destruction of property and equipment, pollution and other environmental damage and suspension of operations. The Company maintains comprehensive insurance coverage, including a $1.0 million general liability insurance policy and a $20.0 million excess liability policy. The Company believes that its insurance is adequate and customary for companies of a similar size engaged in comparable operations, but losses could occur for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. See "Risk Factors--Drilling and Operating Risks." TITLE TO PROPERTIES The Company's land department and contract land professionals have reviewed title records or other title review materials relating to substantially all of its producing properties. The title investigation performed by the Company prior to acquiring undeveloped properties is thorough, but less rigorous than that conducted prior to drilling, consistent with industry standards. The Company believes it has satisfactory title to all its producing properties in accordance with standards generally accepted in the oil and gas industry. The Company's properties are subject to customary royalty interests, liens incident to operating agreements, liens for current taxes and other inchoate burdens which the Company believes do not materially interfere with the use of or affect the value of such properties. At December 31, 1996, the Company's leaseholds for approximately 61% of its net acreage were being kept in force by virtue of production on that acreage in paying quantities. The remaining net acreage was held by lease rentals and similar provisions and requires production in paying quantities prior to expiration of various time periods to avoid lease termination. The Company expects to make acquisitions of oil and gas properties from time to time. In making an acquisition, the Company generally focuses most of its title and valuation efforts on the more significant properties. It is generally not feasible for the Company to review in-depth every property it purchases and all records with respect to such properties. However, even an in-depth review of properties and records may not necessarily reveal existing or potential problems, nor will it permit the Company to become familiar enough with the properties to assess fully their deficiencies and capabilities. Evaluation of future recoverable reserves of oil and gas, which is an integral part of the property selection process, is a process that depends upon evaluation of existing geological, engineering and production data, some or all of which may prove to be unreliable or not indicative of future performance. See "Risk Factors--Uncertainty of Estimates of Reserves and Future Net Revenues." To the extent the seller does not operate the properties, obtaining access to properties and records may be more difficult. Even when problems are identified, the seller may not be willing or financially able to give contractual protection against such problems, and the Company may decide to assume environmental and other liabilities in connection with acquired properties. See "Risk Factors--Acquisition Risks." 69 GOVERNMENTAL REGULATION The Company's operations are affected from time to time in varying degrees by political developments and federal, state, provincial and local laws and regulations. In particular, oil and gas production and related operations are or have been subject to price controls, taxes and other laws and regulations relating to the oil and gas industry. Failure to comply with such laws and regulations can result in substantial penalties. The regulatory burden on the oil and gas industry increases the Company's cost of doing business and affects its profitability. Although the Company believes it is in substantial compliance with all applicable laws and regulations, because such laws and regulations are frequently amended or reinterpreted, the Company is unable to predict the future cost or impact of complying with such laws and regulations. United States. Sales of natural gas by the Company are not regulated and are generally made at market prices. However, the Federal Energy Regulatory Commission ("FERC") regulates interstate natural gas transportation rates and service conditions, which affect the marketing of natural gas produced by the Company, as well as the revenues received by the Company for sales of such production. Although maximum selling prices of natural gas were formerly regulated, on July 26, 1989, the Natural Gas Wellhead Decontrol Act ("Decontrol Act") was enacted, completely removing by January 1, 1993, price and non-price controls for all "first sales" of natural gas, which include all sales by the Company of its own production; consequently, sales of the Company's natural gas currently may be made at uncontrolled market prices, subject to applicable contract provisions. The FERC's jurisdiction over natural gas transportation was unaffected by the Decontrol Act. While sales by producers of natural gas, and all sales of crude oil, condensate and NGLs, can currently be made at uncontrolled market prices, Congress could re-enact prices controls in the future. Since the mid-1980's, the FERC has issued a series of orders, culminating in Order Nos. 636, 636-A, 636-B and 636-C ("Order 636"), that have significantly altered the marketing and transportation of natural gas. Order 636 mandates a fundamental restructuring of interstate pipeline sales and transportation service, including the unbundling by interstate pipelines of the sale, transportation, storage and other components of the city-gate sales services such pipelines previously performed. One of the FERC's purposes in issuing the orders is to increase competition within all phases of the natural gas industry. In July 1996, the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") largely upheld Order 636. A number of parties have appealed this ruling to the U.S. Supreme Court. Certain issues also were remanded to the FERC by the D.C. Circuit. On remand, the FERC, in Order No. 636-C, reaffirmed some elements of the remanded portions of Order 636 and modified others. Order No. 636-C may be the subject of further proceedings at the FERC and is subject to appeal. Numerous parties also have filed petitions for review of orders in individual pipeline restructuring proceedings. Upon judicial review, these orders may be remanded or reversed in whole or in part. Consequently, it is difficult to predict with precision the ultimate effects of Order 636 on the Company. Generally, Order 636 has eliminated or substantially reduced the interstate pipelines' traditional role as wholesalers of natural gas, and has substantially increased competition and volatility in natural gas markets. While significant regulatory uncertainty remains, Order 636 may ultimately enhance the Company's ability to market and transport its natural gas, although it may also subject the Company to greater competition, more restrictive pipeline imbalance tolerances and greater associated penalties for violation of such tolerances. The FERC has announced several important transportation-related policy statements and proposed rule changes, including the appropriate manner in which interstate pipelines release capacity under Order 636 and, more recently, the price which shippers can charge for their released capacity. In addition, in 1995, the FERC issued a policy statement on how interstate natural gas pipelines can recover the costs of new pipeline facilities. In January 1996, the FERC issued a policy statement and a request for comments concerning alternatives to its traditional cost-of-service ratemaking methodology. A number of pipelines have obtained FERC authorization to charge negotiated rates as one such alternative. While any additional FERC action on these matters would affect the Company 70 only indirectly, these policy statements and proposed rule changes are intended to further enhance competition in natural gas markets. The Company cannot predict what action the FERC will take on these matters, nor can it predict whether the FERC's actions will achieve its stated goal of increasing competition in natural gas markets. However, the Company does not believe that it will be treated materially differently than other natural gas producers and marketers with which it competes. Commencing in May 1994, the FERC issued a series of orders in individual cases that delineate its new gathering policy. Among other matters, the FERC slightly narrowed its statutory tests for establishing gathering status and reaffirmed that, except in situations in which the gatherer acts in concert with an interstate pipeline affiliate to frustrate the FERC's transportation policies, it does not generally have jurisdiction over natural gas gathering facilities and services, and that such facilities and services located in state jurisdictions are properly regulated by state authorities. In addition, the FERC has approved numerous transfers by interstate pipelines of gathering facilities to unregulated independent or affiliated gathering companies, subject to the transferee providing service for two years from the date of transfer to the pipeline's existing customers pursuant to a default contract or pursuant to mutually agreeable terms. In August 1996, the D.C. Circuit largely upheld the FERC's new gathering policy, but remanded the FERC's default contract condition. The FERC has not yet issued an order on remand. This new gathering policy may tend to increase competition among gatherers, like the Company. This policy may also result in increased state regulation of the Company's gathering facilities. However, the Company does not believe that it will be affected materially differently by this policy than other producers, gatherers and marketers with which it competes. The Company's gathering operations are subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of facilities. Pipeline safety issues have recently been the subject of increasing focus in various political and administrative arenas at both the state and federal levels. The Company believes its operations, to the extent they may be subject to current gas pipeline safety requirements, comply in all material respects with such requirements. The Company cannot predict what effect, if any, the adoption of this or other additional pipeline safety legislation might have on its operations, but the industry could be required to incur additional capital expenditures and increased costs depending upon future legislative and regulatory changes. The price the Company receives from the sale of oil and NGLs is affected by the cost of transporting such products to market. Effective January 1, 1995, the FERC implemented regulations establishing an indexing system for transportation rates for oil pipelines, which, generally, would index such rates to inflation, subject to certain conditions and limitations. These regulations could increase the cost of transporting oil and NGLs by interstate pipelines, although the most recent adjustment generally decreased rates. These regulations have generally been approved on judicial review. The Company is not able to predict with certainty the effect, if any, of these regulations on its operations. However, the regulations may increase transportation costs or reduce wellhead prices for oil and NGLs. The State of Texas and many other states require permits for drilling operations, drilling bonds and reports concerning operations and impose other requirements relating to the exploration for and production of oil and gas. Such states also have statutes or regulations addressing conservation matters, including provisions for the unitization or pooling of oil and gas properties, the establishment of maximum rates of production from wells and the regulation of spacing, plugging and abandonment of such wells. The statutes and regulations of certain states limit the rate at which oil and gas can be produced from the Company's properties. However, the Company does not believe it will be affected materially differently by these statutes and regulations than any other similarly situated oil and gas company. See "Risk Factors-- Compliance with Environmental and Other Governmental Regulations." 71 Canada. In Canada, producers of oil negotiate sales contracts directly with oil purchasers, with the result that sales of oil are generally made at market prices. The price of oil received by the Company depends in part on oil quality, prices of competing fuels, distance to market, the value of refined products and the supply/demand balance. Oil exports may be made pursuant to export contracts with terms not exceeding one year in the case of light crude, and not exceeding two years in the case of heavy crude, provided that an order approving any such export has been obtained from the National Energy Board ("NEB"). Any oil export to be made pursuant to a contract of a longer duration requires an exporter to obtain an export license from the NEB, and the issue of such license requires the approval of the Governor General in Counsel. In Canada, the price of natural gas sold is determined by negotiation between buyers and sellers. Natural gas exported from Canada is subject to regulation by the NEB. Exporters are free to negotiate prices and other terms with purchasers, provided that export contracts in excess of two years must continue to meet certain criteria prescribed by the NEB. As is the case with oil, natural gas exports for a term of less than two years must be made pursuant to an NEB order, or, in the case of exports for a longer duration, pursuant to an NEB license and Governor General in Council approval. The government of Alberta also regulates the volume of natural gas that may be removed from Alberta for consumption elsewhere based on such factors as reserve availability, transportation arrangements and marketing considerations. In addition to Canadian federal regulation, Alberta and certain other provinces have legislation and regulations that govern royalties payable on production from Crown lands. The royalty regime that is in place at a particular time or location is a significant factor in the profitability of oil and gas production. Royalties payable on production from lands other than Crown lands are determined by negotiations between the mineral owner and the lessee. Crown royalties are determined by governmental regulation and are generally calculated as a percentage of the value of the gross production. The rate of royalties payable generally depends in part on prescribed reference prices, well productivity, geographical location, field discovery date and the type and quality of the petroleum product produced. From time to time the government of Alberta has established incentive programs that have included royalty rate reductions, royalty holidays and tax credits for the purpose of encouraging oil and gas exploration or enhanced production projects. For example, a producer of oil or gas is entitled to a credit against the royalties payable to the Crown by virtue of the Alberta Royalty Tax Credit ("ARTC") program. The ARTC program provides a rebate on Crown royalties paid in respect of eligible producing properties. The ARTC program is based on a price-sensitive formula, and the ARTC rate currently varies between 25% and 75% of the royalty otherwise payable on production. The ARTC rate is currently applied to a maximum of $2.0 million of Alberta Crown royalties otherwise payable by each producer or associated group of producers in each tax year. The rate is established quarterly based on average "par price", as determined by the Alberta Department of Energy for the previous quarterly period. Producing properties acquired from corporations claiming maximum entitlement to ARTC will generally not be eligible for ARTC. ENVIRONMENTAL MATTERS The Company's operations and properties are subject to extensive and changing federal, state, provincial and local laws and regulations relating to environmental protection, including the generation, storage, handling and transportation of oil and gas and the discharge of materials into the environment, and relating to safety and health. The recent trend in environmental legislation and regulation generally is toward stricter standards, and this trend will likely continue. These laws and regulations may require the acquisition of a permit or other authorization before construction or drilling commences and for certain other activities; limit or prohibit construction, drilling and other activities on certain lands lying within wilderness and other protected areas; and impose substantial liabilities for pollution resulting 72 from the Company's operations. The permits required for various of the Company's operations are subject to revocation, modification and renewal by issuing authorities. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines, penalties or injunctions. In the opinion of management, the Company is in substantial compliance with current applicable environmental laws and regulations, and the Company has no material commitments for capital expenditures to comply with existing environmental requirements. Nevertheless, changes in existing environmental laws and regulations or in interpretations thereof could have a significant impact on the Company. The impact of such changes, however, would not likely be any more burdensome to the Company than to any other similarly situated oil and gas company. The Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), also known as the "Superfund" law, and similar state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of persons that are considered to have contributed to the release of a "hazardous substance" into the environment. These persons include the owner or operator of the disposal site or sites where the release occurred and companies that disposed or arranged for the disposal of the hazardous substances found at the site. Persons who are or were responsible for releases of hazardous substances under CERCLA may be subject to joint and several liability for the costs of cleaning up the hazardous substances that have been released into the environment and for damages to natural resources. Furthermore, neighboring landowners and other third parties may file claims for personal injury and property damage allegedly caused by the hazardous substances released into the environment. The Company generates typical oil and gas field wastes, including hazardous wastes, that are subject to the federal Resources Conservation and Recovery Act and comparable state statutes. The United States Environmental Protection Agency and various state agencies have limited the approved methods of disposal for certain hazardous and nonhazardous wastes. Furthermore, certain wastes generated by the Company's oil and gas operations that are currently exempt from regulation as "hazardous wastes" may in the future be designated as "hazardous wastes," and therefore be subject to more rigorous and costly operating and disposal requirements. The Oil Pollution Act ("OPA") imposes a variety of requirements on "responsible parties" for onshore and offshore oil and gas facilities and vessels related to the prevention of oil spills and liability for damages resulting from such spills in waters of the United States. The "responsible party" includes the owner or operator of an onshore facility or vessel or the lessee or permittee of, or the holder of a right of use and easement for, the area where an onshore facility is located. OPA assigns liability to each responsible party for oil spill removal costs and a variety of public and private damages from oil spills. Few defenses exist to the liability for oil spills imposed by OPA. OPA also imposes financial responsibility requirements. Failure to comply with ongoing requirements or inadequate cooperation in a spill event may subject a responsible party to civil or criminal enforcement actions. The Company's Canadian operations are also subject to environmental regulation pursuant to local, provincial and federal legislation. Canadian environmental legislation provides for restrictions and prohibitions on releases or emissions of various substances produced in association with certain oil and gas industry operations and can affect the location of wells and facilities and the extent to which exploration and development is permitted. In addition, legislation requires that well and facilities sites be abandoned and reclaimed to the satisfaction of provincial authorities. In most cases, an environmental assessment and review is required prior to initiating exploration or development projects or undertaking significant changes to existing projects. A breach of such legislation may result in the imposition of fines and issuance of clean-up orders. Environmental legislation in Alberta has recently undergone a major revision and has been consolidated in the Environmental Protection and Enhancement Act. Under the new Act, environmental standards and compliance for releases, clean-up and reporting are stricter. Also, the range of enforcement actions available and the severity of penalties 73 have been significantly increased. These changes will have an incremental effect on the cost of conducting operations in Alberta. The Company owns, leases or operates numerous properties that for many years have produced or processed oil and gas. The Company also owns and operates natural gas gathering, transportation and processing systems. It is not uncommon for such properties to be contaminated with hydrocarbons or polychlorinated biphenyls. Although the Company or previous owners of these interests may have used operating and disposal practices that were standard in the industry at the time, hydrocarbons, polychlorinated biphenyls or other wastes may have been disposed of or released on or under the properties or on or under other locations where such wastes have been taken for disposal. These properties may be subject to federal or state requirements that could require the Company to remove any such wastes or to remediate the resulting contamination. In addition, some of the Company's properties are operated by third parties over whom the Company has no control. Notwithstanding the Company's lack of control over properties operated by others, the failure of the previous owners or operators to comply with applicable environmental regulations may, in certain circumstances, adversely impact the Company. See "Risk Factors--Compliance with Environmental and Other Governmental Regulations." ABANDONMENT COSTS The Company is responsible for payment of plugging and abandonment costs on its oil and gas properties pro rata to its working interest. Based on its experience, the Company anticipates that the ultimate aggregate salvage value of lease and well equipment located on its properties will exceed the costs of abandoning such properties. There can be no assurance, however, that the Company will be successful in avoiding additional expenses in connection with the abandonment of any of its properties. In addition, abandonment costs and their timing may change due to many factors, including actual production results, inflation rates and changes in environmental laws and regulations. EMPLOYEES At May 31, 1997, the Company employed 135 full-time employees, of whom five were executive officers, 28 were technical personnel, 51 were field personnel and 51 were administrative personnel. Of the total employees, 108 were located in the United States and 27 were located in Canada. At May 31, 1997, none of the Company's employees was represented by a labor union. The Company considers its relations with its employees to be good. FACILITIES The Company's principal executive and administrative offices are located at 8115 Preston Road, Suite 400, Dallas, Texas. The offices contain approximately 21,000 square feet of space and are leased through December 31, 2001. Rental payments are approximately $33,500 per month. The Company also maintains a regional office in Corbin, Kentucky consisting of a one-story building containing approximately 7,400 square feet of office space. The Company owns this building. The office of the Company's Canadian subsidiary, The Wiser Oil Company of Canada, is located at 645 7th Avenue, S.W., Suite 2550, Calgary, Alberta. This office contains approximately 14,000 square feet of space and is leased through June 30, 1999. Rental payments are approximately $12,500 per month. LEGAL PROCEEDINGS No legal proceedings are pending against the Company other than litigation incidental to its business that the Company believes will not have a material adverse effect on its financial condition or results of operations. 74 MANAGEMENT DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN OTHER EMPLOYEES
NAME TITLE ---- ----- Andrew J. Shoup, Jr. ........... President, Chief Executive Officer and Director A. Wayne Ritter................. Vice President, Acquisitions and Production Lawrence J. Finn................ Vice President Finance and Chief Financial Officer Kent E. Johnson................. Vice President of Exploration Allan J. Simus.................. President of The Wiser Oil Company of Canada Brett R. Schweikle.............. Manager of Primary Operations Earl Krieg...................... Manager of Secondary Recovery Operations S. Clay Cox..................... Manager of Marketing Larry Tarrant................... Manager of Engineering W.B. Phillips................... Manager of Land David A. Rice................... Manager of Acquisitions Richard Davis................... Controller John W. Cushing, III............ Director Howard G. Hamilton.............. Director C. Frayer Kimball, III.......... Director Lorne H. Larson................. Director Jon L. Mosle, Jr. .............. Director Paul D. Neuenschwander.......... Director A.W. Schenck, III............... Director
Andrew J. Shoup, Jr., 62, has served as President, Chief Executive Officer and a director of the Company since July 1, 1991. From September 1990 until June 1991, Mr. Shoup was engaged as a consultant to Pacific Enterprises Oil Company (USA), an oil and gas exploration and production company ("Pacific Enterprises"). From January 1989 until September 1990, he served as the President and Chief Operating Officer of Pacific Enterprises. From June 1986 until January 1989, he served as Chairman and Chief Executive Officer of Sabine Corporation, an oil and gas exploration and production company. Mr. Shoup has a B.S. Degree in Petroleum Engineering from Louisiana State University, a Masters of Industrial Administration from Yale University and approximately 37 years of experience in the oil and gas industry. A. Wayne Ritter, 57, has served as Vice President, Acquisitions and Production of the Company since August 1993. Mr. Ritter previously served as Vice President in Charge of Acquisitions of the Company from September 1991 to August 1993. From September 1990 until September 1991, he served as Manager of Production--Fort Worth Division of Snyder Oil Corporation, an oil and gas exploration and production company. Prior thereto, he was the Manager of Business Development of Marsh Operating Company, an oil and gas exploration and production company. Mr. Ritter has M.S. and B.S. Degrees in Petroleum Engineering from the University of Texas and approximately 30 years of experience in the oil and gas industry. Lawrence J. Finn, 52, has served as Vice President Finance and Chief Financial Officer of the Company since November 1993. From August 1990 until October 1993, Mr. Finn was President of CWF Energy, Inc., an oil and gas exploration and production company, and from March 1988 until August 1990, he served as Vice President Finance and Chief Financial Officer of Verado Energy, Inc., an oil and gas exploration and production company. Mr. Finn has a B.B.A. Degree in Management Accounting from, and has taken post graduate accounting courses at, the University of Houston. Mr. Finn has approximately 29 years of experience in the oil and gas industry. 75 Kent E. Johnson, 60, has served as Vice President of Exploration of the Company since September 1996. From May 1989 until June 1995, Mr. Johnson served as Vice President Exploration/Development of DALEN Resources, an oil and gas exploration and production company. When DALEN Resources was acquired by Enserch Exploration, Inc. in June 1995, Mr. Johnson became Enserch's Regional Director for Gulf Coast activities and served in that capacity until he joined Wiser. Mr. Johnson has Ph.D. and M.S. Degrees in Geology from the University of Wisconsin, a B.A. Degree in Geology from Augustine College and approximately 34 years of experience in the oil and gas industry. Allan J. Simus, 62, is President of The Wiser Oil Company of Canada ("Wiser Canada") and has served in such capacity since August 1994. From 1988 until joining Wiser Canada, he served as President and General Manager of LL&E Canada, Ltd., an oil and gas exploration and production company. Mr. Simus served as President of Del Norte Resources Ltd., an oil and gas exploration and production company, from 1987 to 1988, Executive Vice President and a director of Onyx Petroleum Exploration Company Ltd., an oil and gas exploration and production company, from 1983 to 1986, and General Manager of Sabine Canada Ltd. from 1974 until 1982. Mr. Simus has B.S. Degrees in Geological Engineering and Geology from Colorado College and approximately 39 years of experience in the oil and gas industry. Brett R. Schweikle, 34, has served as Manager of Primary Operations of the Company since May 1993. Mr. Schweikle previously served as Manager of Production of the Company from January 1992 until April 1993. Earl Krieg, 43, has served as Manager of Secondary Recovery Operations of the Company since May 1993. Prior thereto, he served as Engineering Manager and Senior Acquisitions Engineer of Edisto Resources Corporation, an oil and gas exploration and production company. S. Clay Cox, 45, has served as Manager of Marketing of the Company since 1995. Prior to 1995, he was Vice President of Highland Energy Company, an oil and gas marketing firm in Dallas, Texas, which he joined in 1991. Prior to 1991, he held various oil and gas marketing management positions with Sabine Corporation and Pacific Enterprises. Larry Tarrant, 45, has served as Manager of Engineering of the Company since October 1995. From September 1994 until October 1995, Mr. Tarrant served as Senior Engineer of Parker & Parsley Petroleum Company, an oil and gas exploration and production company. From October 1992 to September 1994, Mr. Tarrant was Engineering Advisor for Bridge Oil Company, an oil and gas exploration and production company. Prior thereto, he held various engineering positions with Oryx Energy Company, an oil and gas exploration and production company. W. B. Phillips, 45, has served as Manager of Land of the Company since 1991. David A. Rice, 44, has served as Manager of Acquisitions of the Company since December 1992. From February 1992 to December 1992, Mr. Rice served as contract acquisitions engineer for the Company. Richard Davis, 43, has served as Controller of the Company since February 1997. From October 1982 to May 1994, Mr. Davis held various positions at Hunt Oil Company, an oil and gas exploration and production company, and from August 1994 to February 1997, he served as Controller of Gemini Exploration Company, an oil and gas exploration and production company. John W. Cushing, III, 63, has served as a director of the Company since 1986. For more than the last five years, Mr. Cushing has served as President of Petroleum Services, Inc., a geologic consulting firm, and President of Hydrocarbon Well Logging, Inc., a well service and engineering company located in Parkersburg, West Virginia. 76 Howard G. Hamilton, 64, has served as a director of the Company since 1974. For more than the last five years, Mr. Hamilton has been the owner and operator of Palm Pavilion, a recreational facility in Clearwater, Florida. C. Frayer Kimball, III, 62, has been a director of the Company since 1972. For more than the last five years, Mr. Kimball has been a principal and Vice President of Petroleum Engineers, Inc., a consulting engineering firm in Lafayette, Louisiana. He is also Vice President of Triumph Energy, Inc., an oil and gas exploration and production company. Lorne H. Larson, 61, has served as a director of the Company since 1995. Since January 1986, Mr. Larson has been President and Chief Executive Officer of ProGas Ltd., a Calgary, Alberta-based company involved in natural gas marketing. Since 1993, he has served as a director of Rigel Energy Corporation, an oil and gas exploration and production company, and since April 1994 has served as a director of The General Accident Assurance Company of Canada, a property and casualty company. Jon L. Mosle, Jr., 67, has been a director of the Company since 1994. Mr. Mosle has been an independent consultant and investor since 1992. From 1984 to 1992, he served as Director of Private Capital of Ameritrust Texas, N.A., a trust company. Mr. Mosle currently serves as a director of Aquila Gas Pipeline Corporation, a gas transmission company, Southwest Securities, Inc., a brokerage firm and member of the New York Stock Exchange, and Trust Company of Texas, a trust company. Paul D. Neuenschwander, 72, has served as a director of the Company since 1964. Mr. Neuenschwander has been an independent oil and gas consultant in Wyoming for more than the last five years. A.W. Schenck, III, 54, has served as a director of the Company since 1986. Since July 1995, he has served as Executive Vice President of the Retail Banking Division of Great Western Financial Corp., and since October 1993, has served as a director of the Consumer Bankers Association. Prior to that time, he held various executive positions with PNC Bank Corp. 77 DESCRIPTION OF CERTAIN SENIOR INDEBTEDNESS The following description of the Credit Agreement as in effect as of the date of this Prospectus does not purport to be complete and is subject to and qualified in its entirety by reference to the Credit Agreement, a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus forms a part. In June 1994, the Company and its Canadian subsidiary entered into the Credit Agreement with a group of banks. Prior to the consummation of the Offering, the Credit Agreement provided for a term loan to the Company's Canadian subsidiary and a revolving credit facility to the Company. Upon consummation of the Offering, the Credit Agreement was amended to provide solely for a revolving credit facility to the Company, to reduce the interest rate on borrowings under the Credit Agreement, to reset the borrowing base thereunder and to make certain other changes, including changes to take into account the issuance by the Company of the Outstanding Notes (collectively, the "Credit Agreement Amendments"). In connection with the Credit Agreement Amendments, the Company's affiliated partnership that held the Company's Maljamar oil and gas properties was dissolved and such properties were transferred to the Company. In addition, in connection with such amendments, the Initial Subsidiary Guarantors unconditionally guaranteed the payment of indebtedness under the Credit Agreement, and the Company agreed that any other Subsidiary Guarantors which at any time guaranteed the Notes would also guarantee the payment of indebtedness under the Credit Agreement. The Company's obligations under the Credit Agreement are not secured. The revolving credit facility under the Credit Agreement may be utilized in two ways: to obtain the issuance of letters of credit and for revolving credit loans. There are two interest rate options available to the Company under the Credit Agreement, each of which includes an "applicable margin" that varies depending upon the ratio of the Company's consolidated senior funded debt (defined in the Credit Agreement to exclude the Notes but include indebtedness under the Credit Agreement and other indebtedness for borrowed money and similar obligations) to the borrowing base (as defined in the Credit Agreement) then in effect under the Credit Agreement. The interest rate options are: (a) the agent bank's prime rate plus an applicable margin ranging from 0% to 0.375% per annum and (b) the London interbank offered rate plus an applicable margin ranging from 0.625% to 1.25% per annum. The London interbank offered rate will be adjusted if the rules of the Board of Governors of the Federal Reserve System impose reserve requirements on certain kinds of deposits maintained by the agent bank. The Company may repay borrowings under the Credit Agreement at any time in whole or in part, without penalty, in certain minimum amounts. Borrowings under the Credit Agreement are limited to the borrowing base (as defined therein). Upon consummation of the Offering, the borrowing base was reset at $80.0 million. The banks may review and redetermine the borrowing base semiannually, and mandatory prepayments will be required over the six months following a redetermination if the Company's consolidated senior funded debt exceeds the borrowing base. Borrowing base redeterminations may be based on a variety of factors, including the banks' analysis of the Company's oil and gas reserves and projected production, but each bank can exercise its discretion in determining the borrowing base, provided that (a) the borrowing base is subject to automatic reduction beginning on April 1, 1999 and continuing until March 31, 2002, which is the termination date of the Credit Agreement, (b) each bank must consistently apply its standards for similar credits to its redeterminations of the borrowing base and (c) certain averaging procedures apply if the individual banks request a different borrowing base. The Company pays the banks an annual commitment fee on the unused availability under the borrowing base. The fee is calculated as a percentage ranging from 0.25% to 0.375% per annum based on the ratio of the Company's consolidated senior funded debt to the borrowing base then in effect. 78 Under the Credit Agreement, the payment of dividends by the Company in any year is limited to the greater of (i) 80% of the Company's adjusted consolidated net income (defined in the Credit Agreement to exclude, among other things, gains from sales of marketable securities) for such year and (ii) $4.5 million. The Credit Agreement also prohibits the Company from incurring any debt if, after giving effect to the incurrence of such debt, either (i) a default or event of default (as defined in the Credit Agreement) exists or (ii) the Company's consolidated senior funded debt would exceed the borrowing base then in effect under the Credit Agreement. The Credit Agreement also prohibits the Company from entering into any hedge transaction for its future production (other than "floor" transactions that do not fix any "ceiling" price for the hedged production) which would cause the amount of production subject to the Company's then existing hedge transactions to exceed 65% of the Company's anticipated production from its proved developed producing reserves during the term of such existing hedge transactions. Furthermore, the Company is required to meet a current ratio test (consolidated current assets to consolidated current liabilities), a consolidated funded debt ratio test (consolidated funded debt to consolidated total capital) and an interest expense maintenance ratio test similar to the Consolidated Interest Coverage Ratio incurrence test described under "Description of the Exchange Notes--Certain Covenants--Limitation on Indebtedness". The Credit Agreement also restricts the purchase (including a repurchase upon the occurrence of a Change of Control), redemption and defeasance of subordinated indebtedness of the Company, including the Notes. The Credit Agreement contains other customary affirmative and restrictive covenants that, among other things, limit the Company and its subsidiaries with respect to liens, investments and sales of assets. The Credit Agreement also contains customary events of default, including, among other things, and subject to applicable grace periods, payment defaults, material misrepresentations, covenant defaults, certain bankruptcy events and judgment defaults. The Company used a portion of the net proceeds of the Offering to pay in full the outstanding indebtedness under the Credit Agreement. At May 31, 1997, no indebtedness was outstanding under the Credit Agreement, but the Company had $80.0 million available under the Credit Agreement, which, if borrowed, would be Senior Indebtedness. The Company intends to reborrow under the Credit Agreement from time to time as necessary to fund acquisition, development, exploitation and exploration activities and for other general corporate purposes. 79 DESCRIPTION OF THE EXCHANGE NOTES The Exchange Notes will be issued under an indenture dated as of May 21, 1997 (the "Indenture") entered into among the Company, the Initial Subsidiary Guarantors and Texas Commerce Bank National Association, as trustee (the "Trustee"). The Exchange Notes will be issued under the same Indenture as the Outstanding Notes, and the Exchange Notes and the Outstanding Notes will constitute a single series of debt securities under the Indenture. In the event that the Exchange Offer is consummated, any Outstanding Notes that remain outstanding after consummation of the Exchange Offer and the Exchange Notes issued in the Exchange Offer will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount of Notes have taken certain actions or exercised certain rights under the Indenture. The Exchange Notes and the Outstanding Notes are sometimes collectively referred to herein as the "Notes." The terms of the Notes will include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "1939 Act"). The following summary of certain terms and provisions of the Notes and the Indenture does not purport to be complete and is qualified in its entirety by reference to the 1939 Act, the Notes and the Indenture. A copy of the Indenture and the form of Notes is available upon request to the Company at the address set forth below under "Incorporation of Certain Documents by Reference." The definitions of certain capitalized terms used in the following summary are set forth below under "Certain Definitions." Capitalized terms used in this summary and not otherwise defined below have the meanings assigned to them in the Indenture. For purposes of this "Description of the Exchange Notes," references to the "Company" shall mean The Wiser Oil Company, excluding its subsidiaries. GENERAL The Notes will mature on May 15, 2007, and will be limited to an aggregate principal amount of $125,000,000. The Notes will bear interest at a rate of 9 1/2% per annum from May 21, 1997 (the "Issue Date"), or from the most recent interest payment date to which interest has been paid, payable semiannually on May 15 and November 15 of each year, beginning on November 15, 1997, to the person in whose name the Note (or any predecessor Note) is registered at the close of business on the immediately preceding May 1 or November 1, as the case may be. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. See "The Exchange Offer--Interest on the Exchange Notes." Principal of, premium, if any, on and interest on the Notes will be payable, and the Notes will be exchangeable and transferable, at an office or agency of the Company, one of which will be maintained for such purpose in The City of New York (which will be an office of the Trustee) or such other office or agency permitted under the Indenture. At the option of the Company, payment of interest may be made by check mailed to the person entitled thereto as shown on the Security Register. The Notes will be issued in denominations of $1,000 and integral multiples thereof. The obligations of the Company under the Outstanding Notes are and under the Exchange Notes will be unconditionally guaranteed on a senior subordinated and unsecured basis by the Subsidiary Guarantors. See "--Subsidiary Guaranties." SUBORDINATION The Outstanding Notes are and the Exchange Notes will be unsecured senior subordinated obligations of the Company. The payment of the principal of, premium, if any, on and interest on the Notes will be subordinated in right of payment, as set forth in the Indenture, to the payment when due in cash of all Senior Indebtedness of the Company. The Notes will rank subordinate in right of payment to all existing and future Senior Indebtedness of the Company, pari passu with any future Pari Passu Indebtedness of the Company and senior to any future Subordinated Indebtedness of the Company. 80 The Subsidiary Guaranty of each Subsidiary Guarantor will rank subordinate in right of payment to all existing and future Senior Indebtedness of such Subsidiary Guarantor, pari passu with any future Pari Passu Indebtedness of such Subsidiary Guarantor and senior to any future Subordinated Indebtedness of such Subsidiary Guarantor. As described below, the Notes and the Subsidiary Guaranties will be structurally subordinated to all existing and future liabilities of subsidiaries of the Company that are not Subsidiary Guarantors. At March 31, 1997, after giving effect to the Credit Agreement Amendments, the Offering and the application of the estimated net proceeds of the Offering, the outstanding Senior Indebtedness of the Company and the Subsidiary Guarantors would have been less than $1.0 million (not including $80.0 million of borrowing capacity available under the Credit Agreement which, if borrowed, would be Senior Indebtedness), the Company and the Subsidiary Guarantors would have had no outstanding Pari Passu Indebtedness or Subordinated Indebtedness and the total Indebtedness and other liabilities (including trade payables, deferred taxes and accrued liabilities, but excluding any obligations owed to affiliates) of the Company's subsidiaries other than the Subsidiary Guarantors would have been less than $0.5 million. The Company and its subsidiaries have other liabilities, including contingent liabilities, which may be significant. Although the Indenture contains limitations on the amount of additional Indebtedness that the Company and its Restricted Subsidiaries may incur, the amounts of such Indebtedness could be substantial and such Indebtedness may be Senior Indebtedness or Pari Passu Indebtedness. See "Risk Factors--Subordination of Notes and Subsidiary Guaranties" and "--Certain Covenants--Limitation on Indebtedness." The Company may not pay principal of, premium, if any, on or interest on, the Notes or make any deposit pursuant to the provisions of the Indenture described under "--Defeasance and Covenant Defeasance" and may not repurchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if (i) any principal, premium, interest or other amounts due in respect of any Senior Indebtedness of the Company is not paid within any applicable grace period (including at maturity) or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full in cash; provided, however, that the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of each issue of Designated Senior Indebtedness of the Company. During the continuance of any default (other than a default described in clause (i), and provided that no acceleration has occurred and is continuing as described in clause (ii), of the preceding sentence) with respect to any such Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration), the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice of such default from the Representative of the holders of any such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Payment Blockage Notice") and ending 179 days after receipt of such notice by the Company and the Trustee unless earlier terminated (a) by written notice to the Company and the Trustee from the Representative which gave such Payment Blockage Notice, (b) because such default is no longer continuing or (c) because such Designated Senior Indebtedness has been repaid in full in cash. Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders have accelerated the maturity of such Designated Senior Indebtedness and not rescinded such acceleration, the Company may (unless otherwise prohibited as described in the first sentence of this paragraph) resume payments on the Notes after the end of such Payment Blockage Period. No more than one Payment Blockage Notice may be given in any consecutive 360-day period. Upon any payment or distribution of the assets of the Company upon a total or partial liquidation, dissolution or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership, or similar proceeding relating to the Company or its property, the holders of Senior Indebtedness of 81 the Company will be entitled to receive payment in full in cash before the Holders of the Notes are entitled to receive any payment of principal of, or premium, if any, on or interest on, the Notes. In addition, until the Senior Indebtedness of the Company is paid in full in cash, any distribution made by or on behalf of the Company to which Holders of Notes would be entitled but for the subordination provisions of the Indenture will be made to holders of the Senior Indebtedness of the Company, except that Holders of Notes may receive and retain shares of stock and any debt securities that are subordinated to all Senior Indebtedness of the Company to at least the same extent as the Notes. The Subsidiary Guaranty of each Subsidiary Guarantor will be subordinated to Senior Indebtedness of such Subsidiary Guarantor to the same extent and in the same manner as the Notes are subordinated to Senior Indebtedness of the Company. In addition, the holders of Designated Senior Indebtedness of a Subsidiary Guarantor will have rights corresponding to those of holders of Designated Senior Indebtedness of the Company. The Indenture provides that the subordination provisions of the Indenture applicable to the Notes and the Subsidiary Guaranties may not be amended, waived or modified in a manner that would adversely affect the rights of the holders of any Designated Senior Indebtedness of the Company or of a Subsidiary Guarantor unless the holders of such Indebtedness consent in writing (in accordance with the provisions of such Indebtedness) to such amendment, waiver or modification. The Notes will be structurally subordinated to the claims of creditors of the Company's subsidiaries that are not Subsidiary Guarantors (see "Subsidiary Guaranties"), including trade creditors and holders of Preferred Stock of such subsidiaries (if any), and such claims will generally have a priority as to the assets of such subsidiaries over the claims of the Company and the holders of the Company's Indebtedness, including the Notes. The Subsidiary Guaranty of each Subsidiary Guarantor will be structurally subordinated to the claims of creditors of any subsidiary of such Subsidiary Guarantor that is not itself a Subsidiary Guarantor, including trade creditors and holders of Preferred Stock of such subsidiary (if any), and such claims will generally have a priority as to the assets of such subsidiary over the claims of its parent Subsidiary Guarantor and the holders of such Subsidiary Guarantor's Indebtedness, including the applicable Subsidiary Guaranty. Under the Indenture, and subject to certain limitations, Indebtedness may be incurred by subsidiaries of the Company and the Subsidiary Guarantors. See "--Certain Covenants--Limitation on Indebtedness." SUBSIDIARY GUARANTIES Under the circumstances described below, the Company's payment obligations under the Notes will be jointly and severally guaranteed by the Subsidiary Guarantors. The Subsidiary Guaranty of each Subsidiary Guarantor will be an unsecured senior subordinated obligation of such Subsidiary Guarantor. See "-- Subordination." As of the Issue Date and the date of this Prospectus, the only Subsidiary Guarantors were the Initial Subsidiary Guarantors. The Indenture requires the Company to cause any Restricted Subsidiary (other than a Foreign Subsidiary) that becomes a Significant Subsidiary (and any Significant Subsidiary, other than a Foreign Subsidiary, that was previously an Unrestricted Subsidiary and becomes a Restricted Subsidiary) after the Issue Date to execute and deliver to the Trustee a supplemental indenture pursuant to which such Significant Subsidiary will become a Subsidiary Guarantor. Subject to the preceding sentence, any Subsidiary Guarantor that is no longer a Significant Subsidiary may, by execution and delivery to the Trustee of a supplemental indenture satisfactory to the Trustee, be released from its Subsidiary Guaranty and cease to be a Subsidiary Guarantor. In addition, certain mergers, consolidations and dispositions of Property may result in the addition of additional Subsidiary Guarantors or the release of Subsidiary Guarantors. See "--Merger, Consolidation and Sale of Substantially All Assets." Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary in accordance with the terms of the Indenture shall be released from and relieved of its obligations under its Subsidiary Guaranty upon execution and delivery of a supplemental indenture satisfactory to the Trustee. 82 The obligations of each Subsidiary Guarantor will be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guaranty or pursuant to its contribution obligations under the Indenture, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law. Each Subsidiary Guarantor that makes a payment or distribution under a Subsidiary Guaranty shall be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor. See "Risk Factors--Fraudulent Conveyance." Each Subsidiary Guarantor may merge or consolidate with or dispose of its assets to the Company or a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor. In addition, each Subsidiary Guarantor may merge or consolidate with or dispose of its assets to any Person (other than the Company or a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor), regardless of whether such Person is an Affiliate of such Subsidiary Guarantor, if (i) immediately after such transaction, and giving effect thereto, no Default or Event of Default has occurred and is continuing; (ii) such transaction was subject to, and consummated in compliance with, as appropriate, either the provisions of the Indenture described under "--Certain Covenants--Limitation on Asset Sales" or those described under "--Merger, Consolidation and Sale of Substantially All Assets;" and (iii) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such transaction complies with the above provisions and that all conditions precedent relating to such transaction have been complied with. OPTIONAL REDEMPTION Except as provided in the next succeeding paragraph, the Notes are not redeemable prior to May 15, 2002. At any time on or after May 15, 2002, the Notes are redeemable at the option of the Company, in whole or in part (equal to $1,000 in principal amount or an integral multiple thereof), on not less than 30 nor more than 60 days' prior notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest, if any, to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevent interest date), if redeemed during the 12-month period commencing on May 15 of the years indicated below.
REDEMPTION YEAR PRICE ---- ---------- 2002.......................................................... 104.750% 2003.......................................................... 103.167% 2004.......................................................... 101.583% 2005 and thereafter........................................... 100.000%
Notwithstanding the foregoing, prior to May 15, 2000 the Company may, at any time or from time to time, redeem up to 33 1/3% of the aggregate principal amount of the Notes originally outstanding at a redemption price of 109.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net proceeds of one or more Equity Offerings of the Company, provided that at least 66 2/3% of the aggregate principal amount of the Notes originally issued remains outstanding immediately after the occurrence of such redemption and provided, further, that such redemption shall occur not later than 75 days after the date of the closing of any such Equity Offering. The redemption shall be made in accordance with procedures set forth in the Indenture. 83 If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. SINKING FUND There will be no mandatory sinking fund payments for the Notes. PURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 in principal amount or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase (the "Change of Control Payment"). Within 30 days following any Change of Control, the Company shall mail a notice to each Holder stating, among other things: (i) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to the Indenture and that all Notes (or portions thereof) properly tendered will be accepted for payment; (ii) the purchase price and the purchase date, which shall be, subject to any contrary requirements of applicable law, no fewer than 30 days nor more than 60 days from the date the Company notifies the Holders of the occurrence of the Change of Control (the "Change of Control Payment Date"); (iii) that any Note (or portion thereof) accepted for payment (and duly paid on the Change of Control Payment Date) pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date; (iv) that any Notes (or portions thereof) not properly tendered will continue to accrue interest; (v) a description of the transaction or transactions constituting the Change of Control; (vi) the procedures that Holders of Notes must follow in order to tender their Notes (or portions thereof) for payment and the procedures that Holders of Notes must follow in order to withdraw an election to tender Notes (or portions thereof) for payment; and (vii) all other instructions and materials necessary to enable Holders to tender Notes pursuant to the Change of Control Offer. The Company will comply, to the extent applicable, with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Change of Control Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described above by virtue thereof. If a Change of Control were to occur, there can be no assurance that the Company and the Subsidiary Guarantors would have sufficient financial resources, or would be able to arrange financing, to pay the purchase price for all Notes tendered by the Holders thereof. In addition, the Credit Agreement contains, and any future credit agreements or other agreements relating to indebtedness (including Senior Indebtedness or Pari Passu Indebtedness) to which the Company or a Subsidiary Guarantor becomes a party may contain, restrictions on the purchase of Notes. If a Change of Control occurs at a time when the Company and the Subsidiary Guarantors are unable to purchase the Notes (due to insufficient financial resources, contractual prohibition or otherwise), such failure to purchase tendered Notes would constitute an Event of Default under the Indenture, which would, in turn, constitute a default under the Credit Agreement and may constitute a default under the terms of any other Indebtedness of the Company or the Subsidiary Guarantors then outstanding. In such circumstances, the subordination provisions in the Indenture would likely prohibit payments to Holders of Notes. See "--Subordination." 84 The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. A "Change of Control" shall be deemed to occur if (i) any "person" or "group" (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of 50 percent or more of the total voting power of all classes of the Voting Stock of the Company or warrants or options to acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale, lease, conveyance or transfer of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole (other than to any Wholly Owned Restricted Subsidiary) shall have occurred, (iii) the stockholders of the Company shall have approved any plan of liquidation or dissolution of the Company, (iv) the Company consolidates with or merges into another Person or any Person merges into the Company in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is reclassified into or exchanged for cash, securities or other property, other than any such transaction where (a) the outstanding Voting Stock of the Company is reclassified into or exchanged for Voting Stock of the surviving corporation that is Capital Stock and (b) either (x) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving corporation immediately after such transaction in substantially the same proportion as before the transaction or (y) within 25 days after the closing of any such transaction both Moody's and S&P shall have expressly affirmed credit ratings for the Notes (after giving effect to such transaction) that are as high or higher than the highest such ratings for the Notes given by such services, respectively, at any time during the 90 days immediately prior to the public announcement of such transaction and such expressly affirmed ratings are at least B1 from Moody's and B+ from S&P or (v) during any period of two consecutive years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. The definition of Change of Control includes a phrase relating to the sale, lease, conveyance or transfer of "all or substantially all" of the Company's assets. The Indenture is governed by New York law, and there is no established quantitative definition under New York law of "substantially all" of the assets of a corporation. Accordingly, if the Company and its Restricted Subsidiaries were to engage in a transaction in which they disposed of less than all of the assets of the Company and its Restricted Subsidiaries taken as a whole, a question of interpretation could arise as to whether such disposition was of "substantially all" of their assets and whether the Company was required to make a Change of Control Offer. Except as described above with respect to a Change of Control, the Indenture does not contain any other provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar restructuring. BOOK-ENTRY SYSTEM The Outstanding Notes have been issued and the Exchange Notes will initially be issued in the form of one or more Global Securities (as defined in the Indenture) held in book-entry form. The Notes 85 will be deposited with the Trustee as custodian for the Depository, and the Depository or its nominee will initially be the sole registered holder of the Notes for all purposes under the Indenture. Except as set forth below, a Global Security may not be transferred except as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository. The Notes that are issued as described below under "--Certificated Notes" will be issued in definitive form. Upon the transfer of a Note in definitive form, such Note will, unless the applicable Global Security has previously been exchanged for Notes in definitive form, be exchanged for an interest in the Global Security representing the principal amount of the Notes being transferred. Upon the issuance of a Global Security, the Depository or its nominee will credit, on its internal system, the accounts of persons holding through it with the respective principal amounts of the individual beneficial interests represented by such Global Security acquired by such persons. Ownership of beneficial interests in a Global Security will be limited to persons that have accounts with the Depository ("participants") or persons that may hold interests through participants. Ownership of beneficial interests by participants in a Global Security will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by the Depository or its nominee for such Global Security. Ownership of beneficial interests in such Global Security by persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. The laws of some jurisdictions require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. Payment of principal of, premium, if any, on and interest on Notes represented by any such Global Security will be made to the Depository or its nominee, as the case may be, as the sole registered owner and the sole Holder of the Notes represented thereby for all purposes under the Indenture. None of the Company, the Trustee, any agent of the Company or the Initial Purchasers will have any responsibility or liability for any aspect of the Depository's reports relating to or payments made on account of beneficial ownership interests in a Global Security representing any Notes or for maintaining, supervising or reviewing any of the Depository's records relating to such beneficial ownership interests. The Company has been advised by the Depository that upon receipt of any payment of principal of, premium, if any, on or interest on any Global Security, the Depository will immediately credit, on its book-entry registration and transfer system, the accounts of participants with payments in amounts proportionate to their respective beneficial interests in the principal or face amount of such Global Security, as shown on the records of the Depository. The Company expects that payments by participants to owners of beneficial interests in a Global Security held through such participants will be governed by standing instructions and customary practices as is now the case with securities held for customer accounts registered in "street name" and will be the sole responsibility of such participants. So long as the Depository or its nominee, is the registered owner or holder of such Global Security, the Depository or such nominee, as the case may be, will be considered the sole owner or holder of the Notes represented by such Global Security for the purposes of receiving payment on the Notes, receiving notices and for all other purposes under the Indenture and the Notes. Beneficial interests in Notes will be evidenced only by, and transfers thereof will be effected only through, records maintained by the Depository and its participants. Except as provided above, owners of beneficial interests in a Global Security will not be entitled to and will not be considered the holders of such Global Security for any purposes under the Indenture. Accordingly, each person owning a beneficial interest in a Global Security must rely on the procedures of the Depository and, if such person is not a 86 participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder under the Indenture. The Company understands that under existing industry practices, if the Company requests any action of holders or that an owner of a beneficial interest in a Global Security desires to give or take any action that a Holder is entitled to give or take under the Indenture, the Depository would authorize the participants holding the relevant beneficial interest to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. The Depository has advised the Company that it will take any action permitted to be taken by a Holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account with the Depository interests in a Global Security are credited and only in respect of such portion of the aggregate principal amount of the Notes as to which such participant or participants has or have given such direction. The Depository has advised the Company that the Depository is a limited- purpose trust company organized under the Banking Law of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency"' registered under the Exchange Act. The Depository was created to hold the securities of its participants and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations some of whom (or their representatives) own the Depository. Access to the Depository's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly. CERTIFICATED NOTES The Notes represented by a Global Security are exchangeable for certificated Notes only if (i) the Depository notifies the Company that it is unwilling or unable to continue as a depository for such Global Security or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, and a successor depository is not appointed by the Company within 90 days, (ii) the Company executes and delivers to the Trustee a notice that such Global Security shall be so transferable, registrable and exchangeable, and such transfer shall be registrable or (iii) there shall have occurred and be continuing an Event of Default or an event which, with the giving of notice or lapse of time or both, would constitute an Event of Default with respect to the Notes represented by such Global Security. Any Global Security that is exchangeable for certificated Notes pursuant to the preceding sentence will be transferred to, and registered and exchanged for, certificated Notes in authorized denominations and registered in such names as the Depository or its nominee holding such Global Security may direct. Subject to the foregoing, a Global Security is not exchangeable, except for a Global Security of like denomination to be registered in the name of the Depository or its nominee. If a Global Security becomes exchangeable for certificated Notes, (i) certificated Notes will be issued only in fully registered form in denominations of $1,000 or an integral multiple thereof, (ii) payment of principal, premium, any repurchase price, and interest on the certificated Notes will be payable, and the transfer of the certificated Notes will be registrable, at the office or agency of the Company maintained for such purposes and (iii) no service charge will be made for any issuance of the certificated Notes, although the Company may require payment of a sum sufficient to cover any transfer tax, assessment or similar governmental charge imposed in connection therewith. In addition, such certificates will bear the legend referred to under "Notice to Investors" (unless the Company determines otherwise in accordance with applicable law) subject, with respect to such Notes, to the provisions of such legend. 87 CERTAIN COVENANTS Limitation on Indebtedness. The Indenture provides that the Company will not, and it will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (other than Permitted Indebtedness) unless, after giving pro forma effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, (i) no Default or Event of Default would occur as a consequence of, or be continuing following, such Incurrence and application and (ii) the Consolidated Interest Coverage Ratio would exceed 2.5 to 1.0. "Permitted Indebtedness" means any and all of the following: (i) Indebtedness arising under the Indenture, including without limitation the Notes and the Subsidiary Guaranties; (ii) Indebtedness under the Senior Credit Facilities, to the extent that the aggregate principal amount of all Indebtedness under the Senior Credit Facilities (whether incurred pursuant to this clause (ii) or otherwise), together with all Indebtedness Incurred pursuant to clause (ix) of this paragraph in respect of Indebtedness previously Incurred pursuant to this clause (ii), at any one time outstanding does not exceed the greater of (a) $100.0 million and (b) an amount equal to the sum of (1) $30.0 million and (2) 15% of Adjusted Consolidated Net Tangible Assets determined as of the date of the Incurrence of such Indebtedness; provided, however, that the maximum amount available to be outstanding under the Senior Credit Facilities as Permitted Indebtedness pursuant to this clause (ii) shall be permanently reduced by the amount of Net Available Cash from Asset Sales used to repay Indebtedness under the Senior Credit Facilities and not subsequently reinvested in Additional Assets or used to permanently reduce other Indebtedness to the extent permitted pursuant to the provisions of the Indenture described under "--Limitation on Asset Sales;" (iii) Indebtedness to the Company or any of its Wholly Owned Restricted Subsidiaries by any of its Restricted Subsidiaries or Indebtedness of the Company to any of its Wholly Owned Restricted Subsidiaries (but only so long as such Indebtedness is held by the Company or a Wholly Owned Restricted Subsidiary); (iv) Indebtedness in respect of bid, performance or surety obligations issued by or for the account of the Company or any Restricted Subsidiary in the ordinary course of business, including guaranties and letters of credit functioning as or supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (v) Indebtedness under Permitted Hedging Agreements; (vi) in-kind obligations relating to oil or gas balancing positions arising in the ordinary course of business that are customary in the Oil and Gas Business; (vii) Indebtedness outstanding on the Issue Date (which is not repaid with the proceeds of the Offering) not otherwise permitted in clauses (i) through (vi) above; (viii) Indebtedness not otherwise permitted to be Incurred pursuant to this paragraph (excluding any Indebtedness Incurred pursuant to the provisions of the Indenture described in the immediately preceding paragraph), provided that the aggregate principal amount of all Indebtedness Incurred pursuant to this clause (viii), together with all Indebtedness Incurred pursuant to clause (ix) of this paragraph in respect of Indebtedness previously Incurred pursuant to this clause (viii), at any one time outstanding does not exceed $10.0 million; (ix) Indebtedness Incurred in exchange for, or the proceeds of which are used to refinance, (a) Indebtedness referred to in clauses (i) through (viii) of this paragraph (including Indebtedness previously Incurred pursuant to this clause (ix)) and (b) Indebtedness Incurred pursuant to the provisions of the Indenture described in the immediately preceding paragraph, provided that such Indebtedness is Permitted Refinancing Indebtedness; and (x) Indebtedness consisting of obligations in respect of purchase price adjustments, indemnities or Guaranties in connection with the acquisition or disposition of assets. Limitation on Liens. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to exist any Lien on or with respect to any Property of the Company or such Restricted Subsidiary, whether owned on the Issue Date or acquired after the Issue Date, or any interest therein or any income or profits therefrom, unless the Notes (and, in the case of a Restricted Subsidiary which is a Subsidiary Guarantor, the Subsidiary Guaranty of such Subsidiary) are secured equally and ratably with (or prior to) any and all other obligations secured by such Lien, except that the Company and its Restricted 88 Subsidiaries may enter into, create, incur, assume or suffer to exist Liens securing Senior Indebtedness, Liens securing Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor and Permitted Liens. "Permitted Liens" means any and all of the following: (i) Liens existing as of the Issue Date; (ii) Liens securing the Notes, the Subsidiary Guaranties and other obligations arising under the Indenture; (iii) any Lien existing on any Property (including future improvements thereon, accessions thereto and proceeds thereof) of a Person at the time such Person is merged or consolidated with or into the Company or a Subsidiary Guarantor or becomes a Restricted Subsidiary that is a Subsidiary Guarantor (and not incurred in anticipation of or in connection with such transaction), provided that such Liens are not extended to other Property of the Company or the Subsidiary Guarantors; (iv) any Lien existing on any Property (including future improvements thereon, accessions thereto and proceeds thereof) at the time of the acquisition thereof (and not incurred in anticipation of or in connection with such transaction), provided that such Liens are not extended to other Property of the Company or the Subsidiary Guarantors; (v) any Lien incurred in the ordinary course of business incidental to the conduct of the business of the Company or the Subsidiary Guarantors or the ownership of their Property (including, without limitation, (a) easements, rights of way and similar encumbrances, (b) rights or title of lessors under leases (other than Capital Lease Obligations), (c) rights of collecting banks having rights of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or the Subsidiary Guarantors or on deposit with or in the possession of such banks, (d) Liens imposed by law, including without limitation, Liens under workers' compensation or similar legislation and mechanics', carriers', warehousemens', materialmens', suppliers' and vendors' Liens, (e) Liens incurred to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and incurred in a manner consistent with industry practice and (f) Liens on deposits made in the ordinary course of business), in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of Property (other than Trade Accounts Payable) and which do not in the aggregate impair in any material respect the use of Property in the operation of the business of the Company and its Restricted Subsidiaries taken as a whole; (vi) Liens for taxes, assessments and governmental charges not yet due or the validity of which are being contested in good faith by appropriate proceedings, promptly instituted and diligently conducted, and for which adequate reserves have been established to the extent required by GAAP; (vii) Liens incurred to secure appeal bonds and judgment and attachment Liens, in each case in connection with litigation or legal proceedings that are being contested in good faith by appropriate proceedings so long as reserves have been established to the extent required by GAAP as in effect at such time and so long as such Liens do not encumber assets by an amount in excess of $15.0 million; (viii) Liens securing Permitted Hedging Agreements of the Company and its Restricted Subsidiaries; (ix) Oil and Gas Liens Incurred in the ordinary course of the business of the Company and its Restricted Subsidiaries; (x) purchase money security interests (including, without limitation, Capital Lease Obligations) granted in connection with the acquisition of fixed assets in the ordinary course of business of the Company and its Restricted Subsidiaries, provided, that (a) such Liens attach only to the Property (including future improvements thereon, accessions thereto and proceeds thereof) so acquired with the purchase money Indebtedness secured thereby and (b) the Indebtedness secured by such Liens is not in excess of the purchase price of such Property; (xi) Liens resulting from the deposit of funds or evidences of Indebtedness in trust for the purpose of decreasing or defeasing Indebtedness of the Company or any of its Subsidiaries so long as such deposit of funds is permitted by the provisions of the Indenture described under "-- Limitation on Restricted Payments;" (xii) Liens resulting from a pledge of Capital Stock of a Person that is not a Restricted Subsidiary; (xiii) Liens to secure any permitted extension, renewal, refinancing, refunding or exchange (or successive extensions, renewals, refinancings, refundings or exchanges), in whole or in part, of or for any Indebtedness secured by Liens referred to in clauses (i), (ii), (iii), (iv) and (x) above; provided, however, that (a) such new Lien shall be limited to all or part of the same Property (including future 89 improvements thereon, accessions thereto and proceeds thereof) that secured the original Lien and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (1) the outstanding principal amount or, if greater, the committed amount of the Indebtedness secured by such original Lien immediately prior to such extension, renewal, refinancing, refunding or exchange and (2) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; (xiv) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets; and (xv) Liens in favor of the Company or a Subsidiary Guarantor. Notwithstanding anything in this paragraph to the contrary, the term "Permitted Liens" does not include Liens resulting from the creation, incurrence, issuance, assumption or Guarantee of any Production Payment and Reserve Sale other than (a) Production Payments and Reserve Sales in connection with the acquisition of Properties after the Issue Date, provided that any such Liens created in connection therewith are created, incurred, issued, assumed or guaranteed in connection with the financing of, and within 60 days after the acquisition of, the Property that is subject thereto, (b) Production Payments and Reserve Sales, other than those described in clause (a) of this sentence, to the extent such Production Payments and Reserve Sales constitute Asset Sales made pursuant to and in compliance with the provisions of the Indenture described under "--Limitation on Asset Sales," or (c) Oil and Gas Liens that are not Dollar-Denominated Production Payments or Volumetric Production Payments, that are incurred in the ordinary course of business of the Company and its Restricted Subsidiaries, and that may be deemed under the definition of Production Payments and Reserve Sales to constitute Production Payments and Reserve Sales. Limitation on Restricted Payments. (a) The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment if, at the time of and after giving effect to the proposed Restricted Payment, (i) any Default or Event of Default would have occurred and be continuing, (ii) the Company could not incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the provisions of the Indenture described under "--Limitation on Indebtedness" or (iii) the aggregate amount expended or declared for all Restricted Payments from the Issue Date would exceed the sum (without duplication) of the following: (A) 50% of the aggregate Consolidated Net Income of the Company accrued on a cumulative basis commencing on the last day of the fiscal quarter immediately preceding the Issue Date, and ending on the last day of the fiscal quarter ending on or immediately preceding the date of such proposed Restricted Payment (or, if such aggregate Consolidated Net Income shall be a loss, minus 100% of such loss), plus (B) the aggregate net cash proceeds, or the Fair Market Value of Property other than cash, received by the Company on or after the Issue Date from the issuance or sale (other than to a Subsidiary of the Company) of Capital Stock of the Company or any options, warrants or rights to purchase Capital Stock of the Company, plus (C) the aggregate net cash proceeds or the Fair Market Value of Property other than cash received by the Company as capital contributions to the Company (other than from a Subsidiary of the Company) on or after the Issue Date, plus (D) the aggregate net cash proceeds received by the Company upon the exercise of any options, warrants or rights to purchase shares of Capital Stock of the Company (other than from a Subsidiary of the Company) on or after the Issue Date, plus (E) the aggregate net cash proceeds received on or after the Issue Date by the Company from the issuance or sale (other than to any Subsidiary of the Company) of convertible debt or convertible Redeemable Stock that has been converted into or exchanged for Capital Stock of the Company, together with the aggregate cash received by the Company at the time of such conversion or exchange, plus 90 (F) to the extent not otherwise included in the Company's Consolidated Net Income, an amount equal to the net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Issue Date in any Person resulting from (1) payments of interest on debt, dividends, repayments of loans or advances or other transfers or distributions of Property, in each case to the Company or any Restricted Subsidiary from any Person other than the Company or a Restricted Subsidiary, and in an amount not to exceed the book value of such Investments previously made in such Person that were treated as Restricted Payments, or (2) the designation of any Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount not to exceed the lesser of (x) the book value of all Investments previously made in such Unrestricted Subsidiary that were treated as a Restricted Payments and (y) the Fair Market Value of such Unrestricted Subsidiary, plus (G) $10.0 million. (b) The limitations set forth in paragraph (a) above will not prevent the Company or any Restricted Subsidiary from making the following Restricted Payments so long as, at the time thereof, no Default or Event of Default shall have occurred and be continuing (except in the case of clause (i) below under which the payment of a dividend is permitted, so long as the declaration of such dividend was made in compliance with the provisions under "Limitation on Restricted Payments"): (i) the payment of any dividend on Capital Stock of the Company or any Restricted Subsidiary within 60 days after the declaration thereof, if at such declaration date such dividend could have been paid in compliance with paragraph (a) above; (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary, in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary of the Company) of Capital Stock of the Company; (iii) the making of any principal payment on or the repurchase, redemption, defeasance or other acquisition or retirement for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, of any Pari Passu Indebtedness or Subordinated Indebtedness (other than Redeemable Stock) in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary of the Company) of Capital Stock of the Company; (iv) the making of any principal payment on or the repurchase, redemption, defeasance or other acquisition or retirement for value of Pari Passu Indebtedness or Subordinated Indebtedness in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent Incurrence (other than a sale to a Subsidiary of the Company) of Pari Passu Indebtedness or Subordinated Indebtedness so long as such new Indebtedness is Permitted Refinancing Indebtedness and such new Indebtedness (A) has an Average Life to Stated Maturity that is longer than the Average Life to Stated Maturity of the Notes and (B) has a Stated Maturity for its final scheduled principal payment that is at least 91 days later than the Stated Maturity of the final scheduled principal payment of the Notes; and (v) loans made to officers, directors or employees of the Company or any Restricted Subsidiary approved by the Board of Directors (or a duly authorized officer), the proceeds of which are used solely (A) to purchase common stock of the Company in connection with a restricted stock or employee stock purchase plan, or to exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options or (B) to refinance loans, together with accrued interest thereon, made pursuant to item (A) of this clause (v). The actions described in clauses (i), (ii), (iii) and (v) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall reduce the amount that would otherwise be available for Restricted Payments under paragraph (a) (provided 91 that any dividend paid pursuant to clause (i) of this paragraph (b) shall reduce the amount that would otherwise be available under paragraph (a) when declared, but not also when subsequently paid pursuant to such clause (i)), and the actions described in clause (iv) of this paragraph (b) shall be Restricted Payments that shall be permitted to be taken in accordance with this paragraph (b) but shall not reduce the amount that would otherwise be available for Restricted Payments under paragraph (a). Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries. The Indenture provides that the Company will not (i) permit any Restricted Subsidiary to sell or otherwise issue any Capital Stock other than to the Company or one of its Wholly Owned Restricted Subsidiaries or (ii) permit any Person other than the Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any other Restricted Subsidiary, except, in each case, for (a) directors' qualifying shares, (b) the Capital Stock of a Restricted Subsidiary owned by a Person at the time such Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person in connection with the formation of the Restricted Subsidiary, or transfers thereof, (c) a sale of all of the Capital Stock of a Restricted Subsidiary owned by the Company or its Subsidiaries effected in accordance with the provisions of the Indenture described under "--Limitation on Asset Sales," or (d) any sale or issuance of Capital Stock of a Foreign Subsidiary that is required to be issued to or owned by the government of a foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Foreign Subsidiary to transact business in such foreign jurisdiction, provided, that any such sale or issuance shall be deemed to be an Asset Sale to the extent the percentage of the total outstanding Voting Stock of such Foreign Subsidiary owned directly and indirectly by the Company is reduced as a result of such sale or issuance and any such sale or issuance must be made in compliance with the provisions of the Indenture described under "-- Limitation on Asset Sales." Limitation on Asset Sales. The Indenture provides that the Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares and assets subject to such Asset Sale and (ii) all of the consideration paid to the Company or such Restricted Subsidiary in connection with such Asset Sale is in the form of cash, cash equivalents, Liquid Securities, Exchanged Properties or the assumption by the purchaser of liabilities of the Company (other than liabilities of the Company that are by their terms subordinated to the Notes), liabilities of any Subsidiary Guarantor that made such Asset Sale (other than liabilities of a Subsidiary Guarantor that are by their terms subordinated to such Subsidiary Guarantor's Subsidiary Guaranty) or liabilities of any Restricted Subsidiary that made such Asset Sale and which is not a Subsidiary Guarantor, in each case as a result of which the Company and its remaining Restricted Subsidiaries are no longer liable ("Permitted Consideration"); provided, however, that the Company and its Restricted Subsidiaries shall be permitted to receive Property other than Permitted Consideration, so long as the aggregate Fair Market Value of all such Property other than Permitted Consideration received from Asset Sales and held by the Company or any Restricted Subsidiary at any one time shall not exceed 7.5% of Adjusted Consolidated Net Tangible Assets. The Net Available Cash from Asset Sales by the Company or a Restricted Subsidiary may be applied by the Company or such Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness of the Company or Indebtedness of such Restricted Subsidiary), to (i) prepay, repay or purchase Senior Indebtedness of the Company or a Subsidiary Guarantor or Indebtedness of such Restricted Subsidiary (in each case excluding Indebtedness owed to the Company or an Affiliate of the Company), (ii) to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) or (iii) purchase Notes or purchase both Notes and one or more series or issues of other Pari Passu Indebtedness on a pro rata basis (excluding Notes and Pari Passu Indebtedness owned by the Company or an Affiliate of the Company). 92 Any Net Available Cash from an Asset Sale not applied in accordance with the preceding paragraph within 365 days from the date of such Asset Sale shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to purchase Notes having an aggregate principal amount equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer") at a purchase price equal to 100% of the principal amount of such Notes plus accrued and unpaid interest, if any, to the Purchase Date (as defined) in accordance with the procedures (including prorating in the event of oversubscription) set forth in the Indenture, but, if the terms of any Pari Passu Indebtedness require that a Pari Passu Offer be made contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be prorated between the Prepayment Offer and such Pari Passu Offer in accordance with the aggregate outstanding principal amounts of the Notes and such Pari Passu Indebtedness, and the aggregate principal amount of Notes for which the Prepayment Offer is made shall be reduced accordingly. If the aggregate principal amount of Notes tendered by Holders thereof exceeds the amount of available Excess Proceeds, then such Excess Proceeds will be allocated pro rata according to the principal amount of the Notes tendered and the Trustee will select the Notes to be purchased in accordance with the Indenture. To the extent that any portion of the amount of Excess Proceeds remains after compliance with the second sentence of this paragraph and provided that all Holders of Notes have been given the opportunity to tender their Notes for purchase as described in the following paragraph in accordance with the Indenture, the Company or such Restricted Subsidiary may use such remaining amount for general corporate purposes and the amount of Excess Proceeds will be reset to zero. Within five days after the 365th day following the date of an Asset Sale, the Company shall, if it is obligated to make an offer to purchase the Notes pursuant to the preceding paragraph, send a written Prepayment Offer notice, by first-class mail, to the Holders of the Notes (the "Prepayment Offer Notice"), accompanied by such information regarding the Company and its Subsidiaries as the Company in good faith believes will enable such Holders of the Notes to make an informed decision with respect to the Prepayment Offer. The Prepayment Offer Notice will state, among other things, (i) that the Company is offering to purchase Notes pursuant to the provisions of the Indenture, (ii) that any Note (or any portion thereof) accepted for payment (and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to accrue interest on the Purchase Date, (iii) that any Securities (or portions thereof) not properly tendered will continue to accrue interest, (iv) the purchase price and purchase date, which shall be, subject to any contrary requirements of applicable law, no less than 30 days nor more than 60 days after the date the Prepayment Offer Notice is mailed (the "Purchase Date"), (v) the aggregate principal amount of Notes to be purchased, (vi) a description of the procedure which Holders of Notes must follow in order to tender their Notes and the procedures that Holders of Notes must follow in order to withdraw an election to tender their Notes for payment, and (vii) all other instructions and materials necessary to enable Holders to tender Notes pursuant to the Prepayment Offer. The Company will comply, to the extent applicable, with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws or regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes as described above. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Prepayment Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described above by virtue thereof. There can be no assurance that the Company and the Subsidiary Guarantors will be able to fund any Prepayment Offer. Upon consummation of the Offering, the Credit Agreement will, and any future credit agreements or other agreements relating to indebtedness (including Senior Indebtedness or Pari Passu Indebtedness) to which the Company or a Subsidiary Guarantor becomes a party may, contain restrictions on the repurchase of Notes. If a Prepayment Offer is required to be made at a time when such restrictions are in effect, such failure to purchase tendered Notes would constitute an Event of Default under the Indenture, which would, in turn, constitute a default under the Credit Agreement and 93 may constitute a default under the terms of any other Indebtedness of the Company or the Subsidiary Guarantors then outstanding. In such circumstances, the subordination provisions in the Indenture would likely prohibit payments to Holders of Notes. See "--Subordination." Incurrence of Layered Indebtedness. The Indenture provides that (i) the Company will not Incur any Indebtedness which is subordinated or junior in right of payment to any Senior Indebtedness of the Company unless such Indebtedness constitutes Indebtedness which is junior to, or pari passu with, the Notes in right of payment and (ii) no Subsidiary Guarantor will incur any Indebtedness that is subordinated or junior in right of payment to any Senior Indebtedness of such Subsidiary Guarantor unless such Indebtedness constitutes Indebtedness which is junior to, or pari passu with, such Subsidiary Guarantor's Subsidiary Guaranty in right of payment. Limitation on Transactions with Affiliates. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into any transaction or series of transactions (including, but not limited to, the sale, transfer, disposition, purchase, exchange or lease of Property, the making of any Investment, the giving of any Guarantee or the rendering of any service) with or for the benefit of any Affiliate of the Company (other than the Company or a Wholly Owned Restricted Subsidiary), unless (i) such transaction or series of transactions is on terms no less favorable to the Company or such Restricted Subsidiary than those that could be obtained in a comparable arm's- length transaction with a Person that is not an Affiliate of the Company or such Restricted Subsidiary, and (ii) with respect to a transaction or series of transactions involving aggregate payments by or to the Company or such Restricted Subsidiary having a Fair Market Value equal to or in excess of (a) $1.0 million but less than $5.0 million, an officer of the Company, in his good faith judgment, believes such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by an Officer's Certificate delivered to the Trustee, (b) $5.0 million but less than $15.0 million, the Board of Directors of the Company (including a majority of the disinterested members of the Board of Directors of the Company) approves such transaction or series of transactions and, in its good faith judgment, believes that such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by a certified resolution delivered to the Trustee or (c) $15.0 million, (1) the Company receives from an independent, nationally recognized investment banking firm or appraisal firm, in either case specializing or having a specialty in the type and subject matter of the transaction (or series of transactions) at issue, a written opinion that such transaction (or series of transactions) is fair, from a financial point of view, to the Company or such Restricted Subsidiary and (2) the Board of Directors of the Company (including a majority of the disinterested members of the Board of Directors of the Company) approves such transaction or series of transactions and, in its good faith judgment, believes that such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by a certified resolution delivered to the Trustee. The limitations of the preceding paragraph do not apply to (i) the payment of reasonable and customary regular fees to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries, (ii) indemnities of officers and directors of the Company or any Subsidiary consistent with such Person's bylaws and applicable statutory provisions, (iii) the Company's and its Restricted Subsidiaries' employee compensation and other benefit arrangements, (iv) loans made (a) to officers, directors or employees of the Company or any Restricted Subsidiary approved by the Board of Directors (or by a duly authorized officer), the proceeds of which are used solely to purchase common stock of the Company in connection with a restricted stock or employee stock purchase plan, or to exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options, or (b) to refinance loans, together with accrued interest thereon, made pursuant to this clause (iv), (v) advances and loans to officers, directors and employees of the Company or any Subsidiary in the ordinary course of business, provided such loans and advances (excluding loans or advances made pursuant to the preceding clause (iv)) do not exceed $2.0 million at any one time outstanding or (vi) Investments 94 in Unrestricted Subsidiaries which are deemed to be Restricted Payments under the provisions under "Limitations on Restricted Payments." Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Indenture provides that the Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, assume or otherwise cause or suffer to exist or become effective, or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction on the legal right of any Restricted Subsidiary to (i) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or Redeemable Stock held by the Company or a Subsidiary Guarantor, (ii) pay any Indebtedness or other obligation owed to the Company or any Subsidiary Guarantor, (iii) make any Investments in the Company or any Subsidiary Guarantor, or (iv) transfer any of its property or assets to the Company or any Subsidiary Guarantor. Such limitation will not apply (a) with respect to clauses (iii) and (iv) only, to encumbrances and restrictions (1) in existence under or by reason of any agreements in effect on the Issue Date, (2) required under Senior Credit Facilities that are not more restrictive than those in effect under the Senior Credit Facilities on the Issue Date, (3) in existence with respect to a Restricted Subsidiary at the time it became a Restricted Subsidiary if (A) such encumbrance or restriction was not created in anticipation of or in connection with the transactions pursuant to which the Restricted Subsidiary became a Restricted Subsidiary and (B) immediately following such transaction, on a pro forma basis, the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the provisions of the Indenture described under "--Limitation on Indebtedness" or (4) which result from the renewal, refinancing, extension or amendment of an agreement referred to in the immediately preceding clauses (1), (2) and (3), provided, such replacement or encumbrance or restriction is no more restrictive to the Company or Restricted Subsidiary and is not materially less favorable to the Holders of Notes than those under or pursuant to the agreement evidencing the Indebtedness so extended, renewed, refinanced or replaced, and (b) with respect to clause (iv) only, to (1) any restriction on the sale, transfer or other disposition of assets or Property as a result of a Lien permitted under the provisions of the Indenture described under "--Limitation on Liens," (2) any encumbrance or restriction arising in connection with an acquisition of Property, so long as such encumbrance or restriction relates solely to the Property so acquired (including future improvements thereon, accessions thereto and proceeds thereof) and was not created in anticipation of or in connection with such acquisition, (3) customary provisions restricting subletting or assignment of leases and customary provisions in other agreements that restrict assignment of such agreements or rights thereunder, (4) any encumbrance or restriction due to applicable law, (5) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale and (6) restrictions contained in purchase money obligations for Property acquired in the ordinary course of business with respect to transfers of such Property. Restricted and Unrestricted Subsidiaries. Unless defined or designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary subject to the provisions of the next paragraph. The Company may designate a Subsidiary (including a newly formed or newly acquired Subsidiary) of the Company or any of its Restricted Subsidiaries as an Unrestricted Subsidiary if (i) such Subsidiary does not at such time own any Capital Stock, Redeemable Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary, (ii) such Subsidiary does not at such time have any Indebtedness or other obligations which, if in default, would result (with the passage of time or notice or otherwise) in a default on any Indebtedness of the Company or any Restricted Subsidiary and (iii)(a) such designation is effective immediately upon such Subsidiary becoming a Subsidiary of the Company or of a Restricted Subsidiary, (b) the Subsidiary to be so designated has total assets of $1,000 or less or (c) if such Subsidiary has total assets greater than $1,000, then such redesignation as an Unrestricted Subsidiary is deemed to constitute a Restricted Payment in an amount equal to the Fair Market Value of the Company's direct and indirect ownership interest in such Subsidiary, and such Restricted Payment would be permitted to be made at the time of such designation under the provisions of the Indenture described under "--Limitation on 95 Restricted Payments." Except as provided in clauses (iii)(b) and (c) of this paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. The designation of an Unrestricted Subsidiary or removal of such designation shall be made by the Board of Directors of the Company or a committee thereof pursuant to a certified resolution delivered to the Trustee and shall be effective as of the date specified in the applicable certified resolution, which shall not be prior to the date such certified resolution is delivered to the Trustee. The Company will not, and will not permit any of its Restricted Subsidiaries to, take any action or enter into any transaction or series of transactions that would result in a Person becoming a Restricted Subsidiary (whether through an acquisition or otherwise, but excluding the creation by the Company of a new Wholly Owned Restricted Subsidiary) unless, after giving effect to such action, transaction or series of transactions, on a pro forma basis, (i) the Company could Incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to the provisions of the Indenture described under "--Limitation on Indebtedness" and (ii) no Default or Event of Default would occur or be continuing. MERGER, CONSOLIDATION AND SALE OF SUBSTANTIALLY ALL ASSETS The Indenture provides that (i) the Company will not merge or consolidate with or into any other Person (whether or not the Company is the surviving entity), and (ii) the Company will not and will not permit its Restricted Subsidiaries to, directly or indirectly, sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company and its Restricted Subsidiaries taken as a whole to any Person in any one transaction or a series of transactions (including, without limitation, dispositions pursuant to mergers, consolidations, Investments and Production Payments and Reserve Sales), in each case unless: (a) the Surviving Entity (as defined) shall be a corporation organized and existing under the laws of the United States of America or a State thereof or the District of Columbia; (b) in the case of a transaction described in clause (ii) above, such Property shall have been transferred as an entirety or virtually as an entirety to one Person; (c) immediately before and immediately after giving effect to such transaction or series of transactions on a pro forma basis, no Default or Event of Default shall have occurred and be continuing; (d) except in the case of a merger of the Company with a Restricted Subsidiary, immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Surviving Entity would be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions of the Indenture described under "--Limitation on Indebtedness;" (e) except in the case of a merger of the Company with a Restricted Subsidiary, immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Surviving Entity shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to the transaction or series of transactions; (f) if the Company is not the Surviving Entity, then (1) the Surviving Entity shall have executed and delivered to the Trustee a supplemental indenture satisfactory to the Trustee pursuant to which the Surviving Entity assumes the obligations of the Company under the Indenture and the Notes, (2) each Subsidiary Guarantor (unless it is the Surviving Entity) shall have executed and delivered to the Trustee a supplemental indenture satisfactory to the Trustee confirming that such Subsidiary Guarantor's Subsidiary Guaranty remains in full force and effect and guarantees the Surviving Entity's obligations under the Indenture and the Notes, and (3) in the case of a transaction described in clause (ii) above in which the transferee assumes all of the obligations of the Company under the Indenture and the Notes, the Company shall be released and shall no longer be considered an obligor under the Indenture and the Notes; and (g) the Company, and if the Company is not the Surviving Entity the Surviving Entity, shall have delivered to the Trustee an Officer's Certificate (attaching the calculations to demonstrate compliance with (d) and (e) above) and an Opinion of Counsel, each stating that such merger, consolidation or disposition and any such supplemental indentures comply with the terms of the Indenture. The Term "Surviving Entity" shall mean the Person referred to in clauses (i) and (ii) above (1) formed by or surviving any such merger or consolidation involving the Company or (2) to which any sale, transfer, assignment, lease, conveyance or other disposition is made. 96 With respect to each transaction or series of transactions described above, giving effect to such transaction or series of transactions on a pro forma basis shall include, without limitation, (i) treating any Indebtedness not previously the obligation of the Company or any of its Restricted Subsidiaries which becomes an obligation of the Company or any of its Restricted Subsidiaries in connection with or as a result of such transaction or series of transactions as having been incurred at the time of the transaction or series of transactions and (ii) giving effect to any Indebtedness incurred or anticipated to be incurred in connection with such transaction or series of transactions. REPORTS The Indenture provides that, whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, the Company will file with the SEC and furnish to the Holders of Notes all quarterly and annual financial information required to be contained in a filing with the SEC on Forms 10-Q and 10-K, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual consolidated financial statements only, a report thereon by the Company's independent auditors. REGISTRATION AGREEMENT The Company, the Initial Subsidiary Guarantors and the Initial Purchasers entered into the Registration Agreement on May 21, 1997, which required the Company and the Initial Subsidiary Guarantors, among other things, to commence the Exchange Offer and maintain its effectiveness on the terms set forth herein. In addition to their obligations in connection herewith (and assuming the Exchange Offer is consummated prior to October 20, 1997), the Company and the Initial Subsidiary Guarantors will have a continuing obligation to register Outstanding Notes or Exchange Notes for resale under a Form S-3 Registration Statement (the "Shelf Registration Statement") in the following circumstances: (i) an Initial Purchaser holding Outstanding Notes acquired by it and having the status of an unsold allotment in the initial distribution of such Notes so requests by notice to the Company within 10 days after the consummation of the Exchange Offer or (ii) any holder of Outstanding Notes (other than a Participating Broker-Dealer) is ineligible to participate in the Exchange Offer (see "The Exchange Offer -- Resales of Exchange Notes") or does not receive freely tradable Exchange Notes in the Exchange Offer (other than due solely to the status of such holder as an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) and so notifies the Company within 10 days after the consummation of the Exchange Offer. If the Company is required to file a Shelf Registration Statement, it must keep the Shelf Registration Statement effective under the Securities Act to permit resales thereunder until May 21, 1999, or such shorter period ending when all of the Notes covered by such Shelf Registration Statement have been sold. In the event of the filing of a Shelf Registration Statement, the Company will provide to each holder of the Notes covered thereby copies of the prospectus which is a part of the Shelf Registration Statement and notify each such holder when the Shelf Registration Statement has become effective. A holder of Notes that sells such Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions of the Securities Act in connection with such sales and will be bound by the provisions of the Registration Agreement which are applicable to such a holder (including certain indemnification obligations). In addition, each holder of Notes that sells such Notes pursuant to the Shelf Registration Statement will be required to deliver information to be used in connection with the Shelf Registration Statement in order to have its Notes included in the Shelf Registration Statement and to benefit from the provisions regarding the increase in the interest rate borne by the Notes described in "Description of the Outstanding Notes." 97 CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Additional Assets" means (i) any Property (other than cash, Permitted Short-Term Investments or securities) used in the Oil and Gas Business or any business ancillary thereto, (ii) Investments in any other Person engaged in the Oil and Gas Business or any business ancillary thereto (including the acquisition from third parties of Capital Stock of such Person) made in compliance with the provisions of the Indenture described under "--Certain Covenants--Limitation on Restricted Payments" and as a result of which such other Person becomes a Restricted Subsidiary in compliance with the provisions of the Indenture described under "--Certain Covenants--Restricted and Unrestricted Subsidiaries," (iii) the acquisition from third parties of Capital Stock of a Restricted Subsidiary, (iv) the costs of acquiring, exploiting, developing and exploring in respect of oil and gas properties or (v) Permitted Business Investments. "Adjusted Consolidated Net Tangible Assets" means (without duplication), as of the date of determination, the remainder of: (i) the sum of (a) discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries calculated in accordance with SEC guidelines before any state, federal or foreign income taxes, as estimated by the Company and confirmed by a nationally recognized firm of independent petroleum engineers in a reserve report prepared as of the end of the Company's most recently completed fiscal year for which audited financial statements are available, as increased by, as of the date of determination, the estimated discounted future net revenues from (1) estimated proved oil and gas reserves acquired since such year-end, which reserves were not reflected in such year-end reserve report, and (2) estimated oil and gas reserves attributable to upward revisions of estimates of proved oil and gas reserves since such year-end due to exploration, development or exploitation activities, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such year-end reserve report), and decreased by, as of the date of determination, the estimated discounted future net revenues from (3) estimated proved oil and gas reserves produced or disposed of since such year-end and (4) estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas reserves since such year-end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in each case calculated in accordance with SEC guidelines (utilizing the prices utilized in such year-end reserve report); provided that, in the case of each of the determinations made pursuant to clauses (1) through (4), such increases and decreases shall be as estimated by the Company's petroleum engineers, unless there is a Material Change as a result of such acquisitions, dispositions or revisions, in which event the discounted future net revenues utilized for purposes of this clause (i)(a) shall be confirmed in writing by a nationally recognized firm of independent petroleum engineers, (b) the capitalized costs that are attributable to oil and gas properties of the Company and its Restricted Subsidiaries to which no proved oil and gas reserves are attributable, based on the Company's books and records as of a date no earlier than the date of the Company's latest annual or quarterly financial statements, (c) the Net Working Capital on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (d) the greater of (1) the net book value on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (2) the appraised value, as estimated by independent appraisers, of other tangible assets (including, without duplication, Investments in unconsolidated Restricted Subsidiaries) of the Company and its Restricted Subsidiaries, as of the date no earlier than the date of the Company's latest audited financial statements, minus (ii) the sum of (a) minority interests, (b) any net gas balancing liabilities of the Company and its Restricted Subsidiaries reflected in the Company's latest audited financial statements, (c) to the extent 98 included in (i)(a) above, the discounted future net revenues, calculated in accordance with SEC guidelines (utilizing the prices utilized in the Company's year-end reserve report), attributable to reserves which are required to be delivered to third parties to fully satisfy the obligations of the Company and its Restricted Subsidiaries with respect to Volumetric Production Payments (determined, if applicable, using the schedules specified with respect thereto) and (d) the discounted future net revenues, calculated in accordance with SEC guidelines, attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (i)(a) above, would be necessary to fully satisfy the payment obligations of the Company and its Restricted Subsidiaries with respect to Dollar-Denominated Production Payments (determined, if applicable, using the schedules specified with respect thereto). "Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the amount by which the fair value of the Property of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Subsidiary Guaranty, of such Subsidiary Guarantor at such date. "Affiliate" of any specified Person means any other Person (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person or (ii) which beneficially owns or holds directly or indirectly 10% or more of any class of the Voting Stock of such specified Person or of any Subsidiary of such specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Asset Sale" means, with respect to any Person, any transfer, conveyance, sale, lease or other disposition (collectively, "dispositions," and including, without limitation, dispositions pursuant to any consolidation or merger) by such Person or any of its Restricted Subsidiaries in any single transaction or series of transactions of (i) shares of Capital Stock or other ownership interests of another Person (including Capital Stock of Restricted Subsidiaries and Unrestricted Subsidiaries) or (ii) any other Property of such Person or any of its Restricted Subsidiaries; provided, however, that the term "Asset Sale" shall not include: (a) the disposition of Permitted Short-Term Investments, inventory, accounts receivable or other Property (excluding the disposition of oil and gas in place and other interests in real property unless made in connection with a Permitted Business Investment) in the ordinary course of business; (b) the disposition of Property received in settlement of debts owing to the Company or any Restricted Subsidiary as a result of foreclosure, perfection or enforcement of any Lien or debt, which debts were owing to the Company or any Restricted Subsidiary in the ordinary course of business of the Company or such Restricted Subsidiary; (c) any disposition that constitutes a Restricted Payment made in compliance with the provisions of the Indenture described under "--Certain Covenants--Limitation on Restricted Payments;" (d) when used with respect to the Company, any disposition of all or substantially all of the Property of the Company permitted pursuant to the provisions of the Indenture described under "-- Merger, Consolidation and Sale of Substantially All Assets;" (e) the disposition of any Property by the Company or a Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary; (f) the disposition of any asset with a Fair Market Value of less than $1 million; or (g) any Production Payment and Reserve Sale created, incurred, issued, assumed or guaranteed in connection with the financing of, and within 60 days after the acquisition of, the Property that is subject thereto. "Assigned Restricted Subsidiary Indebtedness" means Indebtedness of a Restricted Subsidiary to the Company that the Company has assigned to the lenders under any Senior Credit Facility, as collateral securing Indebtedness of the Company under such Senior Credit Facility. 99 "Average Life" means, with respect to any Indebtedness, at any date of determination, the quotient obtained by dividing (i) the sum of the products of (a) the number of years (and any portion thereof) from the date of determination to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund or mandatory redemption payment requirements) of such Indebtedness multiplied by (b) the amount of each such principal payment by (ii) the sum of all such principal payments. "Capital Lease Obligation" means any obligation which is required to be classified and accounted for as a capital lease obligation in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment date of rent or any other amount due in respect of such obligation. For purposes of the provisions of the Indenture described under "--Certain Covenants-- Limitation on Liens," a Capital Lease Obligation shall be deemed to be secured by a Lien on the Property being leased. "Capital Stock" in any Person means any and all shares, interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to subscribe for or to acquire an equity interest in such Person; provided, however, that "Capital Stock" shall not include Redeemable Stock. "Consolidated Interest Coverage Ratio" means, as of the date of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount of EBITDA of the Company and its consolidated Restricted Subsidiaries for the four full fiscal quarters immediately prior to the Transaction Date for which financial statements are available to (ii) the aggregate Consolidated Interest Expense of the Company and its Restricted Subsidiaries that is anticipated to accrue during a period consisting of the fiscal quarter in which the Transaction Date occurs and the three fiscal quarters immediately subsequent thereto (based upon the pro forma amount and maturity of, and interest payments in respect of, Indebtedness of the Company and its Restricted Subsidiaries expected by the Company to be outstanding on the Transaction Date), assuming for the purposes of this measurement the continuation of market interest rates prevailing on the Transaction Date and base interest rates in respect of floating interest rate obligations equal to the base interest rates on such obligations in effect as of the Transaction Date; provided, that if the Company or any of its Restricted Subsidiaries is a party to any Interest Rate Protection Agreement which would have the effect of changing the interest rate on any Indebtedness of the Company or any of its Restricted Subsidiaries for such four quarter period (or a portion thereof), the resulting rate shall be used for such four quarter period or portion thereof; provided further that any Consolidated Interest Expense with respect to Indebtedness Incurred or retired by the Company or any of its Restricted Subsidiaries during the fiscal quarter in which the Transaction Date occurs shall be calculated as if such Indebtedness was so Incurred or retired on the first day of the fiscal quarter in which the Transaction Date occurs. In addition, if since the beginning of the four full fiscal quarter period preceding the Transaction Date, (a) the Company or any of its Restricted Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive), or increased by an amount equal to the EBITDA (if negative), directly attributable to the assets which are the subject of such Asset Sale for such period calculated on a pro forma basis as if such Asset Sale and any related retirement of Indebtedness had occurred on the first day of such period or (b) the Company or any of its Restricted Subsidiaries shall have acquired any material assets, EBITDA shall be calculated on a pro forma basis as if such asset acquisitions had occurred on the first day of such four fiscal quarter period. "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, (i) the sum of (a) the aggregate amount of cash and noncash interest expense (including capitalized interest) of such Person and its Restricted Subsidiaries for such period as determined on a 100 consolidated basis in accordance with GAAP in respect of Indebtedness (including, without limitation, (1) any amortization of debt discount, (2) net costs associated with Interest Rate Protection Agreements (including any amortization of discounts), (3) the interest portion of any deferred payment obligation, (4) all accrued interest and (5) all commissions, discounts, commitment fees, origination fees and other similar fees and charges owed with respect to the Senior Credit Facilities and other Indebtedness) paid, accrued or scheduled to be paid or accrued during such period; (b) Redeemable Stock dividends of such Person (and of its Restricted Subsidiaries if paid to a Person other than such Person or its Restricted Subsidiaries) declared and payable other than in kind; (c) the portion of any rental obligation of such Person or its Restricted Subsidiaries in respect of any Capital Lease Obligation allocable to interest expense in accordance with GAAP; (d) the portion of any rental obligation of such Person or its Restricted Subsidiaries in respect of any Sale and Leaseback Transaction that is Indebtedness allocable to interest expense (determined as if such obligation were treated as a Capital Lease Obligation); and (e) to the extent any Indebtedness of any other Person (other than Restricted Subsidiaries) is Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate amount of interest paid, accrued or scheduled to be paid or accrued by such other Person during such period attributable to any such Indebtedness; less (ii) to the extent included in (i) above, amortization or write-off of deferred financing costs of such Person and its Restricted Subsidiaries during such period; in the case of both (i) and (ii) above, after elimination of intercompany accounts among such Person and its Restricted Subsidiaries and as determined in accordance with GAAP. "Consolidated Net Income" of any Person means, for any period, the aggregate net income (or net loss, as the case may be) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom, without duplication, (i) items classified as extraordinary gains or losses net of tax (less all fees and expenses relating thereto); (ii) any gain or loss, net of taxes, on the sale or other disposition of assets (less all fees and expenses relating thereto and including the Capital Stock of any other Person) (but in no event shall this clause (ii) apply to the sale in the ordinary course of business of oil, gas or other hydrocarbons produced or manufactured or other personal property other than oil and gas in place); (iii) the net income of any Subsidiary of such specified Person to the extent the transfer to that Person of that income is restricted by contract or otherwise, except for any cash dividends or cash distributions actually paid by such Subsidiary to such Person during such period; (iv) the net income (or loss) of any other Person in which such specified Person or any of its Restricted Subsidiaries has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of such specified Person in accordance with GAAP or is an interest in a consolidated Unrestricted Subsidiary), except to the extent of the amount of cash dividends or other cash distributions actually paid to such Person or its Restricted Subsidiaries by such other Person during such period; (v) the net income of any Person acquired by such specified Person or any of its Restricted Subsidiaries in a pooling-of- interests transaction for any period prior to the date of such acquisition; (vi) any gain or loss, net of taxes, realized on the termination of any employee pension benefit plan; (vii) any adjustments of a deferred tax liability or asset pursuant to Statement of Financial Accounting Standards No. 109 which result from changes in enacted tax laws or rates; and (viii) the cumulative effect of a change in accounting principles. "Consolidated Net Worth" of any Person means the stockholders' equity of such Person and its Restricted Subsidiaries, as determined on a consolidated basis in accordance with GAAP, less (to the extent included in stockholders' equity) amounts attributable to Redeemable Stock of such Person or its Restricted Subsidiaries. "Credit Agreement" means the Credit Agreement, dated June 23, 1994, as amended from time to time, between the Company, The Wiser Oil Company of Canada, NationsBank of Texas, N.A., as agent, and certain banks. 101 "Default" means any event, act or condition the occurrence of which is, or after notice or the passage of time or both would be, an Event of Default. "Designated Senior Indebtedness," when used with respect to the Company means (i) any Senior Indebtedness of the Company under the Credit Agreement, and (ii) any Senior Indebtedness of the Company which has, at the time of determination, an aggregate principal amount outstanding of at least $10.0 million that is specifically designated in the instrument evidencing such Senior Indebtedness and is designated in a notice delivered by the Company to the holders or a Representative of the holders of such Senior Indebtedness and the Trustee as "Designated Senior Indebtedness" of the Company. When used with respect to a Subsidiary Guarantor, "Designated Senior Indebtedness" means (i) any Assigned Restricted Subsidiary Indebtedness of such Subsidiary Guarantor, (ii) any Indebtedness of such Subsidiary Guarantor under the Credit Agreement or a guarantee thereof and (iii) any Senior Indebtedness of such Subsidiary Guarantor which has, at the time of determination, an aggregate principal amount outstanding of at least $10.0 million and that is specifically designated in the instrument evidencing such Senior Indebtedness and is designated in a notice delivered by the Subsidiary Guarantor to the holders or a Representative of the holders of such Senior Indebtedness and the Trustee as "Designated Senior Indebtedness" of the Subsidiary Guarantor. "Dollar-Denominated Production Payments" means production payment obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith. "EBITDA" means with respect to any Person for any period, the Consolidated Net Income of such Person for such period, plus (i) the sum of, to the extent reflected in the consolidated income statement of such Person and its Restricted Subsidiaries for such period from which Consolidated Net Income is determined and deducted in the determination of such Consolidated Net Income, without duplication, (a) income tax expense (but excluding income tax expense relating to sales or other disposition of assets (including the Capital Stock of any other Person) the gains and losses from which are excluded in the determination of such Consolidated Net Income), (b) Consolidated Interest Expense, (c) depreciation and depletion expense, (d) amortization expense, (e) exploration expense, and (f) any other noncash charges including, without limitation, unrealized foreign exchange losses; less (ii) the sum of, to the extent reflected in the consolidated income statement of such Person and its Restricted Subsidiaries for such period from which Consolidated Net Income is determined and added in the determination of such Consolidated Net Income, without duplication (a) income tax recovery (but excluding income tax recovery relating to sales or other dispositions of assets (excluding the Capital Stock of any other Person) the gains and losses from which are included in the determination of such Consolidated Net Income) and (b) unrealized foreign exchange gains. "Equity Offering" means a bona fide underwritten sale to the public of Capital Stock of the Company pursuant to a registration statement (other than a Form S-8 or any other form relating to securities issuable under any employee benefit plan of the Company) that is declared effective by the SEC following the Issue Date. "Event of Default" has the meaning set forth under the caption "--Events of Default and Notice." "Exchanged Properties" means properties used or useful in the Oil and Gas Business received by the Company or a Restricted Subsidiary in trade or as a portion of the total consideration for other such properties. "Exchange Rate Contract" means, with respect to any Person, any currency swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or any combination thereof, entered into for the purpose of limiting or managing exchange rate risks. 102 "Fair Market Value" means, with respect to any assets to be transferred pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash consideration or property transferred or received by any Person, the fair market value of such consideration or property as determined in good faith by (i) any officer of the Company if such fair market value is less than $5.0 million and (ii) the Board of Directors of the Company as evidenced by a certified resolution delivered to the Trustee if such fair market value is equal to or in excess of $5.0 million; provided that if such resolution indicates that such fair market value is equal to or in excess of $15.0 million and such transaction involves any Affiliate of the Company (other than a Restricted Subsidiary), such resolution shall be accompanied by the written opinion of an independent, nationally recognized investment banking firm or appraisal firm, in either case specializing or having a specialty in the type and subject matter of the transaction (or series of transactions) at issue, to the effect that such consideration or property is fair, from a financial point of view, to such Person. "Foreign Subsidiary" means a Restricted Subsidiary (other than The Wiser Oil Company of Canada or any successor thereto) that is formed in a jurisdiction other than the United States or a State thereof or the District of Columbia, that engages in the Oil and Gas Business exclusively outside the United States of America and that is treated as a corporation or an association taxable as a corporation for U.S. federal income tax purposes. "GAAP" means United States generally accepted accounting principles as in effect on the date of the Indenture, unless stated otherwise. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including, without limitation, any Lien on the assets of such Person securing obligations to pay Indebtedness of the primary obligor and any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase or payment of) any security for the payment of such Indebtedness, (ii) to purchase Property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings correlative to the foregoing); provided, however, that a Guarantee by any Person shall not include (a) endorsements by such Person for collection or deposit, in either case, in the ordinary course of business or (b) a contractual commitment by one Person to invest in another Person for so long as such Investment is reasonably expected to constitute a Permitted Investment under clause (ii) of the definition of Permitted Investments. "Holder" means the Person in whose name a Note is registered on the Securities Register. "Incur" means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or obligation on the balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and "Incurring" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time, and is not theretofore classified as Indebtedness, becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness. For purposes of this definition, Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned Subsidiary shall be deemed to be Incurred by the Company or such Restricted Subsidiary in the event such Wholly Owned Subsidiary ceases to be a Wholly Owned Subsidiary or in the event such Indebtedness is transferred to a Person other than the 103 Company or a Wholly Owned Subsidiary. For purposes of this definition, any non-interest bearing or other discount Indebtedness shall be deemed to have been incurred only on the date of original issue thereof. "Indebtedness" means at any time (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person, and whether or not contingent, (i) any Obligation of such Person for borrowed money, (ii) any Obligation of such Person evidenced by bonds, debentures, notes, Guarantees or other similar instruments, including, without limitation, any such Obligations Incurred in connection with the acquisition of Property, assets or businesses, (iii) any reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances or similar facilities issued for the account of such Person, (iv) any Obligation of such Person issued or assumed as the deferred purchase price of Property or services (other than Trade Accounts Payable and other accrued current liabilities incurred in the ordinary course of business), (v) any Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) any payment obligation of such Person under Exchange Rate Contracts, Interest Rate Protection Agreements or Oil and Gas Hedging Contracts at the time of determination, (viii) any obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party and (ix) any obligation of the type referred to in clauses (i) through (viii) of this paragraph of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise; provided that Indebtedness shall not include Production Payments and Reserve Sales. For purposes of this definition, the maximum fixed repurchase price of any Redeemable Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture; provided, however, that if such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional Obligations as described above and the maximum liability at such date in respect of any contingent Obligations described above. "Initial Subsidiary Guarantors" means Wiser Oil Delaware, Inc., a Delaware corporation, The Wiser Marketing Company, a Delaware corporation, Wiser Delaware LLC, a Delaware limited liability company, T.W.O.C., Inc., a Delaware corporation, and The Wiser Oil Company of Canada, a Nova Scotia unlimited liability company, and any successors thereto. "Interest Rate Protection Agreement" means, with respect to any Person, any interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement or other financial agreement or arrangement entered into for the purpose of limiting or managing interest rate risks, to or under which such Person is a party or otherwise obligated. "Investment" means, with respect to any Person (i) any amount paid by such Person, directly or indirectly, to any other Person for Capital Stock or other Property of, or as a capital contribution to, any other Person or (ii) any direct or indirect loan or advance to any other Person (other than accounts receivable of such Person arising in the ordinary course of business); provided, however, that Investments shall not include extensions of trade credit on commercially reasonable terms in accordance with normal trade practices and any increase in the equity ownership in any Person resulting from retained earnings of such Person. "Issue Date" means the date on which the Notes first were issued under the Indenture. "Lien" means, with respect to any Property, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien (statutory or other), charge, easement, 104 encumbrance, preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). For purposes of the provisions of the Indenture described under "--Certain Covenants--Limitation on Liens," a Capital Lease Obligation shall be deemed to be secured by a Lien on the property being leased. "Liquid Securities" means securities (i) of an issuer that is not an Affiliate of the Company, (ii) that are publicly traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market and (iii) as to which the Company is not subject to any restrictions on sale or transfer (including any volume restrictions under Rule 144 under the Securities Act or any other restrictions imposed by the Securities Act) or as to which a registration statement under the Securities Act covering the resale thereof is in effect for as long as the securities are held; provided, that securities meeting the requirements of clauses (i), (ii) and (iii) above shall be treated as Liquid Securities from the date of receipt thereof until and only until the earlier of (x) the date on which such securities are sold or exchanged for cash or Permitted Short-Term Investments and (y) 120 days following the date of receipt of such securities. If such securities are not sold or exchanged for cash or Permitted Short-Term Investments within 120 days of receipt thereof, for purposes of determining whether the transaction pursuant to which the Company or a Restricted Subsidiary received the securities was in compliance with the provisions of the Indenture described under "--Certain Covenants--Limitation on Asset Sales," such securities shall be deemed not to have been Liquid Securities at any time. "Material Change" means an increase or decrease (except to the extent resulting from changes in prices) of more than 30% during a fiscal quarter in the estimated discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries, calculated in accordance with clause (i)(a) of the definition of Adjusted Consolidated Net Tangible Assets; provided, however, that the following will be excluded from the calculation of Material Change: (i) any acquisitions during the quarter of oil and gas reserves with respect to which the Company's estimate of the discounted future net revenues from proved oil and gas reserves has been confirmed by independent petroleum engineers and (ii) any dispositions of Properties during such quarter that were disposed of in compliance with the provisions of the Indenture described under "--Certain Covenants--Limitation on Asset Sales." "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Available Cash" from an Asset Sale means cash proceeds received therefrom (including (i) any cash proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received and (ii) the Fair Market Value of Liquid Securities and Permitted Short-Term Investments, and excluding (i) any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets and (ii) except to the extent subsequently converted to cash, Liquid Securities or Permitted Short-Term Investments within 240 days after such Asset Sale, consideration constituting Exchanged Properties or consideration other than Permitted Consideration), in each case net of (a) all legal, title and recording expenses, commissions and other fees and expenses incurred, and all federal, state, foreign and local taxes required to be paid or accrued as a liability under GAAP as a consequence of such Asset Sale, (b) all payments (which payments are made in a manner that results in the permanent reduction in the balance of such Indebtedness and, if applicable, a permanent reduction in any outstanding commitment for future incurrences of Indebtedness thereunder) made on any Indebtedness (but specifically excluding Indebtedness of the Company and its Restricted Subsidiaries assumed in connection with or in anticipation of such Asset Sale) which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale or by applicable law, be repaid out of the proceeds from such Asset Sale, (c) all 105 distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale and (d) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale (to the extent such reserves are not subsequently reversed within 365 days after such Asset Sale); provided, however, that if any consideration for an Asset Sale (which would otherwise constitute Net Available Cash) is required to be held in escrow pending determination of whether a purchase price adjustment will be made, such consideration (or any portion thereof) shall become Net Available Cash only at such time as it is released to such Person or its Restricted Subsidiaries from escrow; and provided, further, however, that any Exchanged Properties and any consideration other than Permitted Consideration received in connection with an Asset Sale which is subsequently converted to cash, Liquid Securities or Permitted Short-Term Investments within 240 days after such Asset Sale shall be deemed to be Net Available Cash at such time and shall thereafter be applied in accordance with the provisions of the Indenture described under "-- Certain Covenants--Limitation on Asset Sales." "Net Working Capital" means (i) all current assets of the Company and its Restricted Subsidiaries, less (ii) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities included in Indebtedness, in each case as set forth in financial statements of the Company prepared in accordance with GAAP. "Obligation" means any principal, interest, premium, penalty, fee and any other liability payable under the documentation governing any Indebtedness. "Oil and Gas Business" means the business of exploiting, exploring for, developing, acquiring, producing, processing, gathering, marketing, storing, selling, hedging, swapping and transporting hydrocarbons and other related energy businesses. "Oil and Gas Hedging Contract" means, with respect to any Person, any agreement or arrangement, or any combination thereof, financially tied to oil and gas or other hydrocarbon prices, transportation or basis costs or differentials, or similar factors, that is customary in the Oil and Gas Business and is entered into for the purpose of limiting or managing risks associated with fluctuations in such prices, costs, differentials or similar factors. "Oil and Gas Liens" means (i) Liens on any specific property or any interest therein, construction thereon or improvement thereto to secure all or any part of the costs incurred for surveying, exploration, drilling, extraction, development, operation, production, construction, alteration, repair or improvement of, in, under or on such property and the plugging and abandonment of wells located thereon (it being understood that, in the case of oil and gas producing properties, or any interest therein, costs incurred for "development" shall include costs incurred for all facilities relating to such properties or to projects, ventures or other arrangements of which such properties form a part or which relate to such properties or interests); (ii) Liens on an oil or gas producing property to secure obligations Incurred or guarantees of obligations Incurred in connection with or necessarily incidental to commitments for the purchase or sale of, or the transportation or distribution of, the products derived from such property; (iii) Liens arising under partnership agreements, oil and gas leases, overriding royalty agreements, net profits agreements, production payment agreements, royalty trust agreements, master limited partnership agreements, farm-out agreements, division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or other hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, operating agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements which are customary in the Oil and Gas Business, provided in all instances that such Liens are limited 106 to the assets that are the subject of the relevant agreement; (iv) Liens arising in connection with Production Payments and Reserve Sales; and (v) Liens on pipelines or pipeline facilities that arise by operation of law. "Pari Passu Indebtedness" means any Indebtedness of the Company (or a Subsidiary Guarantor) that is pari passu in right of payment to the Notes (or a Subsidiary Guaranty, as appropriate). "Pari Passu Offer" means an offer by the Company or a Subsidiary Guarantor to purchase all or a portion of Pari Passu Indebtedness to the extent required by the indenture or other agreement or instrument pursuant to which such Pari Passu Indebtedness was issued. "Permitted Business Investments" means Investments and expenditures made in the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as a means of actively engaging therein through agreements, transactions, interests or arrangements which permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly with third parties, including, without limitation, (i) ownership interests in oil and gas properties or gathering, transportation, processing, storage or related systems and (ii) Investments and expenditures in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, development agreements, area of mutual interest agreements, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited), subscription agreements, stock purchase agreements and other similar agreements with third parties (including Unrestricted Subsidiaries). "Permitted Consideration" has the meaning assigned to such term in "-- Certain Covenants --Limitation on Asset Sales." "Permitted Hedging Agreements" means (i) Exchange Rate Contracts and Oil and Gas Hedging Contracts to the extent entered into to limit or manage risks incurred in the ordinary course of business and (ii) Interest Rate Protection Agreements but only to the extent that the stated aggregate notional amount thereunder does not exceed 100% of the aggregate principal amount of the Indebtedness of the Company or a Restricted Subsidiary covered by such Interest Rate Protection Agreements at the time such agreements were entered into. "Permitted Investments" means any and all of the following: (i) Permitted Short-Term Investments; (ii) Investments in property, plant and equipment used in the ordinary course of business and Permitted Business Investments; (iii) Investments by any Restricted Subsidiary in the Company; (iv) Investments by the Company or any Restricted Subsidiary in any Restricted Subsidiary; (v) Investments by the Company or any Restricted Subsidiary in a Person where that Person becomes a Restricted Subsidiary or transfers or assigns all of its assets to the Company (including the acquisition from a third party of the Capital Stock of a Restricted Subsidiary or any other Person) if such Person or a Subsidiary of such Person will, as a result of the making of such Investment and all other contemporaneous related transactions, become a Restricted Subsidiary or be merged or consolidated with or transfer or convey all or substantially all of its assets to the Company or a Restricted Subsidiary; (vi) Investments in the form of securities received from Asset Sales, provided that such Asset Sales are made in compliance with the provisions of the Indenture described under "--Certain Covenants--Limitation on Asset Sales;" (vii) Investments in negotiable instruments held for collection, lease, utility and other similar deposits, and stock, obligations or other securities received in settlement of debts (including, without limitation, under any bankruptcy or other similar proceeding) owing to the Company or any of its Restricted Subsidiaries as a result of foreclosure, perfection or enforcement of any Liens or Indebtedness, in each of the foregoing cases in the ordinary course of business of the Company or such Restricted Subsidiary; (viii) Investments in the form of Permitted Hedging Agreements of the Company and its Restricted Subsidiaries; (ix) relocation allowances, advances and 107 loans to officers, directors and employees of the Company or any of its Restricted Subsidiaries in the ordinary course of business, provided such items do not exceed in the aggregate $2.0 million at any one time outstanding; and (x) Investments pursuant to any agreement or obligation of the Company or any of its Restricted Subsidiaries as in effect on the Issue Date (other than Investments described in clauses (i) through (ix) above). "Permitted Refinancing Indebtedness" means Indebtedness ("new Indebtedness") Incurred in exchange for, or proceeds of which are used to refinance, other Indebtedness ("old Indebtedness"), provided, however, that (i) such new Indebtedness is in an aggregate principal amount not in excess of the sum of (a) the aggregate principal amount then outstanding of the old Indebtedness (or, if such old Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination), and (b) an amount necessary to pay any fees and expenses, including premiums related to such exchange or refinancing, (ii) such new Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the old Indebtedness, (iii) such new Indebtedness has an Average Life to Stated Maturity at the time such new Indebtedness is Incurred that is equal to or greater than the Average Life to Stated Maturity of the old Indebtedness at such time and (iv) such new Indebtedness is subordinated in right of payment to Senior Indebtedness of the Company (or, if applicable, Senior Indebtedness of a Subsidiary Guarantor) and the Notes (or, if applicable, the Subsidiary Guaranties) to at least the same extent, if any, as the old Indebtedness. "Permitted Short-Term Investments" means (i) Investments in U.S. Government Obligations maturing within one year of the date of acquisition thereof, (ii) Investments in demand accounts, time deposit accounts, certificates of deposit, bankers acceptances and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any State thereof or the District of Columbia that is a member of the Federal Reserve System having capital, surplus and undivided profits aggregating in excess of $500.0 million and whose long-term indebtedness is rated "A" (or higher) according to Moody's, (iii) Investments in demand accounts, time deposit accounts, certificates of deposit, bankers acceptances and money market deposits maturing within one year of the date of acquisition thereof issued by a Canadian bank to which the Bank Act (Canada) applies having capital, surplus and undivided profits aggregating in excess of U.S. $500.0 million, (iv) Investments in deposits available for withdrawal on demand with any commercial bank that is organized under the laws of any country in which the Company or any Restricted Subsidiary maintains an office or is engaged in the Oil and Gas Business, provided that (a) all such deposits have been made in such accounts in the ordinary course of business and (b) such deposits do not at any one time exceed $20.0 million in the aggregate, (v) repurchase and reverse repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) entered into with a bank meeting the qualifications described in either clause (ii) or (iii), (vi) Investments in commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any State thereof or the District of Columbia with a rating at the time as of which any Investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P and (vii) Investments in any money market mutual fund having assets in excess of $250.0 million substantially all of which consist of other obligations of the types described in clauses (i), (ii), (v) and (vi) hereof. "Person" means any individual, corporation, partnership, joint venture, limited liability company, unlimited liability company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" of any Person means Capital Stock of such Person of any class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets 108 upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of Capital Stock of any other class of such Person; provided, however, that "Preferred Stock" shall not include Redeemable Stock. "principal" of any Indebtedness (including the Notes) means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "Production Payments and Reserve Sales" means the grant or transfer by the Company or a Restricted Subsidiary to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), partnership or other interest in oil and gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties where the holder of such interest has recourse solely to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in the Oil and Gas Business. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock and other securities issued by any other Person (but excluding Capital Stock or other securities issued by such first mentioned Person). "Redeemable Stock" of any Person means any equity security of such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or otherwise (including on the happening of an event), is or could become required to be redeemed for cash or other Property or is or could become redeemable for cash or other Property at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Notes; or is or could become exchangeable at the option of the holder thereof for Indebtedness at any time in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Notes; provided, however, that Redeemable Stock shall not include any security by virtue of the fact that it may be exchanged or converted at the option of the holder for Capital Stock of the Company having no preference as to dividends or liquidation over any other Capital Stock of the Company. "Representative" means the trustee, agent or representative expressly authorized to act in such capacity, if any, for an issue of Senior Indebtedness. "Restricted Payment" means (i) a dividend or other distribution declared or paid on the Capital Stock or Redeemable Stock of the Company or to the Company's stockholders (other than dividends, distributions or payments made solely in Capital Stock of the Company or in options, warrants or other rights to purchase or acquire Capital Stock or Redeemable Stock), or declared and paid to any Person other than the Company or any of its Restricted Subsidiaries on the Capital Stock or Redeemable Stock of any Restricted Subsidiary, (ii) a payment made by the Company or any of its Restricted Subsidiaries (other than to the Company or any Restricted Subsidiary) to purchase, redeem, acquire or retire any Capital Stock or Redeemable Stock or any options, warrants or other rights to acquire such Capital Stock or Redeemable Stock of the Company or of a Restricted Subsidiary, (iii) a payment made by the Company or any of its Restricted Subsidiaries to redeem, repurchase, defease or otherwise acquire or retire for value (including pursuant to mandatory repurchase covenants), prior to any scheduled maturity, scheduled sinking fund or scheduled mandatory redemption, any Pari Passu Indebtedness or any Indebtedness of the Company which is subordinate (whether pursuant to its terms or by operation of law) in right of payment to the Notes except (a) to the extent Pari Passu Indebtedness may be purchased out of Net Available Cash in compliance with the provisions of the Indenture described under "--Limitation on Asset Sales," (b) a Pari Passu Offer, (c) to the extent of Excess Proceeds remaining after compliance with the provisions of the Indenture described under 109 "--Certain Covenants--Limitation on Asset Sales," and to the extent required by the indenture or other agreement or instrument pursuant to which any Subordinated Indebtedness was issued, an offer to purchase such Subordinated Indebtedness upon a disposition of assets, and (d) upon a "Change of Control" (even if such event is not a Change of Control under the Indenture) to the extent required by the indenture or other agreement or instrument pursuant to which any Pari Passu Indebtedness or Subordinated Indebtedness was issued provided the Company is then in compliance with the provisions of the Indenture described under "--Purchase at the Option of Holders Upon a Change of Control," (iv) an Investment (other than a Permitted Investment) by the Company or a Restricted Subsidiary in any Person other than the Company or a Restricted Subsidiary, or (v) the sale or issuance of Capital Stock of a Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary if the result thereof is that such Restricted Subsidiary shall cease to be a Restricted Subsidiary, in which event the amount of such "Restricted Payment" shall be the Fair Market Value of the remaining interest, if any, in such former Restricted Subsidiary held by the Company and its other Restricted Subsidiaries. "Restricted Subsidiary" means any Subsidiary of the Company that has not been designated an Unrestricted Subsidiary in the manner provided in the covenant described under "--Certain Covenants--Restricted and Unrestricted Subsidiaries." "S&P " means Standard & Poor's Ratings Services, a division of The McGraw- Hill Companies, Inc., and its successors. "Sale and Leaseback Transaction" means, with respect to any Person, any direct or indirect arrangement (excluding, however, any such arrangement between such Person and a Wholly Owned Restricted Subsidiary of such Person or between one or more Wholly Owned Restricted Subsidiaries of such Person) pursuant to which Property is sold or transferred by such Person or a Restricted Subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its Restricted Subsidiaries. "Senior Credit Facilities" means collectively, one or more senior credit facilities or commercial paper facilities with banks or other institutional lenders (including, without limitation, the credit facility pursuant to the Credit Agreement), together with any guaranties, security and related documents, as all such credit facilities and documents may be amended, supplemented, extended, increased, refinanced or replaced from time to time. "Senior Indebtedness" when used with respect to the Company means the Obligations of the Company with respect to Indebtedness of the Company (including all Indebtedness under the Senior Credit Facilities), whether outstanding on the date of the Indenture or hereafter created, incurred or assumed, and any renewal, refunding, refinancing, replacement or extension thereof, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes; provided that Senior Indebtedness of the Company shall not include (i) Indebtedness of the Company to a Subsidiary of the Company, (ii) amounts owed for goods, materials or services purchased in the ordinary course of business, (iii) Indebtedness incurred in violation of the Indenture, (iv) amounts payable or any other Indebtedness to employees of the Company or any Subsidiary of the Company, (v) any liability for federal, state, local or other taxes owed or owing by the Company, (vi) any Indebtedness of the Company that, when incurred and without regard to any election under Section 1111(b) of the United States Bankruptcy Code, was without recourse to the Company, (vii) Pari Passu or Subordinated Indebtedness of the Company, (viii) Indebtedness of the Company that is represented by Redeemable Stock, and (ix) Indebtedness evidenced by the Notes. When used with respect to a Subsidiary Guarantor, "Senior Indebtedness" means the Obligations of a Subsidiary Guarantor with respect to Indebtedness (including all Indebtedness under the Senior Credit Facilities) of such Subsidiary Guarantor, whether outstanding on the date of the Indenture or hereafter 110 created, incurred or assumed, and any renewal, refunding, refinancing, replacement or extension thereof, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Subsidiary Guaranties; provided that Senior Indebtedness of a Subsidiary Guarantor shall not include (i) Indebtedness of such Subsidiary Guarantor to the Company or a Subsidiary of the Company (other than Assigned Restricted Subsidiary Indebtedness), (ii) amounts owed for goods, materials or services purchased in the ordinary course of business, (iii) Indebtedness incurred in violation of the Indenture, (iv) amounts payable or any other Indebtedness to employees of the Company or any Subsidiary of the Company, (v) any liability for federal, state, local or other taxes owed or owing by such Subsidiary Guarantor, (vi) any Indebtedness of such Subsidiary Guarantor that, when incurred and without regard to any election under Section 1111(b) of the United States Bankruptcy Code, was without recourse to such Subsidiary Guarantor, (vii) Pari Passu or Subordinated Indebtedness of such Subsidiary Guarantor, (viii) Indebtedness of such Subsidiary Guarantor that is represented by Redeemable Stock, and (ix) Indebtedness evidenced by the Notes and the Subsidiary Guaranties. "Significant Subsidiary" means, at any date of determination, any Subsidiary of a Person that, together with its Subsidiaries, (i) for the most recent fiscal year of such Person, accounted for more than 5% of the consolidated revenues of such Person and its Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 5% of the consolidated assets of such Person and its Subsidiaries. "Stated Maturity," when used with respect to any security or any installment of principal thereof or interest thereon, means the date specified in such security as the fixed date on which the principal of such security or such installment of principal or interest is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Indebtedness" means Indebtedness of the Company (or a Subsidiary Guarantor) that is expressly subordinated in right of payment to the Notes (or a Subsidiary Guaranty, as appropriate). "Subsidiary" of a Person means (i) another Person which is a corporation a majority of whose Voting Stock is at the time, directly or indirectly, owned or controlled by (a) the first Person, (b) the first Person and one or more of its Subsidiaries or (c) one or more of the first Person's Subsidiaries or (ii) another Person which is not a corporation (x) at least 50% of the ownership interest of which and (y) the power to elect or direct the election of a majority of the directors or other governing body of which are controlled by Persons referred to in clause (a), (b) or (c) above. "Subsidiary Guarantors" means (i) as of the Issue Date, the Initial Subsidiary Guarantors, and (ii) thereafter, unless released from their Subsidiary Guaranties as permitted by the Indenture, the Initial Subsidiary Guarantors and any other Restricted Subsidiary that becomes a guarantor of the Notes in compliance with the provisions of the Indenture and executes a supplemental indenture agreeing to be bound by the terms of the Indenture. "Subsidiary Guaranty" means an unconditional, unsecured senior subordinated guaranty of the Notes given by any Restricted Subsidiary pursuant to the terms of the Indenture. "Trade Accounts Payable" means accounts payable or other obligations of the Company or any Restricted Subsidiary to trade creditors created or assumed by the Company or such Restricted Subsidiary in the ordinary course of business in connection with the obtaining of goods or services. 111 "Unrestricted Subsidiary" means (i) each Subsidiary of the Company that the Company has designated pursuant to the provision of the Indenture described under "--Certain Covenants--Restricted and Unrestricted Subsidiaries" as an Unrestricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary. "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian, with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided, however, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Volumetric Production Payments" means production payment obligations recorded as deferred revenue in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Voting Stock" of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the extent (i) all of the Capital Stock or other ownership interests in such Restricted Subsidiary, other than any directors' qualifying shares mandated by applicable law, is owned directly or indirectly by the Company or (ii) such Restricted Subsidiary does substantially all of its business in one or more foreign jurisdictions and is required by the applicable laws and regulations of such foreign jurisdiction to be partially owned by the government of any such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Restricted Subsidiary to transact business in such foreign jurisdiction, provided that the Company, directly or indirectly, owns the remaining Capital Stock or ownership interest in such Restricted Subsidiary and, by contract or otherwise, controls the management and business of such Restricted Subsidiary and derives the economic benefits of ownership of such Restricted Subsidiary to substantially the same extent as if such Restricted Subsidiary were a Wholly Owned Subsidiary. "Wholly Owned Subsidiary" means any Subsidiary of the Company to the extent (i) all of the Capital Stock or other ownership interests in such Subsidiary, other than any directors' qualifying shares mandated by applicable law, is owned directly or indirectly by the Company or (ii) such Subsidiary does substantially all of its business in one or more foreign jurisdictions and is required by the applicable laws and regulations of any such foreign jurisdiction to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Subsidiary to transact business in such foreign jurisdiction, provided that the Company, directly or indirectly, owns the remaining Capital Stock or ownership interest in such Subsidiary and, by contract or otherwise, controls the management and business of such Subsidiary and derives the economic benefits of ownership of such Subsidiary to substantially the same extent as if such Subsidiary were a Wholly Owned Subsidiary. 112 DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that the Company and the Subsidiary Guarantors will be discharged from all their obligations with respect to the Notes (except for certain obligations to exchange or register the transfer of Notes, to replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold moneys for payment in trust) upon the deposit in trust for the benefit of the Holders of the Notes of money or U.S. Government Obligations, or a combination thereof, which, through the payment of principal, premium, if any, and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of and any premium and interest on the Notes at Stated Maturity thereof or on earlier redemption in accordance with the terms of the Indenture and the Notes. Such defeasance or discharge may occur only if, among other things, the Company has delivered to the Trustee an Opinion of Counsel to the effect that (i) the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling or (ii) since the date of the Indenture there has been a change in the applicable federal income tax law, in either case to the effect that Holders of the Notes will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge were not to occur; and that the resulting trust will not be an "Investment Company" within the meaning of the Investment Company Act of 1940 unless such trust is qualified thereunder or exempt from regulation thereunder. The Indenture provides that if the Company takes certain actions described below, it may omit to comply with certain covenants, including those described under "--Purchase at the Option of Holders Upon a Change of Control," "-- Certain Covenants" and in clauses (d) and (e) under the first paragraph of "-- Merger, Consolidation and Sale of Substantially All Assets," and the occurrence of certain Events of Default, which are described below in clause (iii) (with respect to such covenants) and clauses (iv) and (v) under "-- Events of Default and Notice" will be deemed not to be or result in an Event of Default. The Company, in order to exercise such option, will be required to deposit, in trust for the benefit of the Holders of the Notes, money or U.S. Government Obligations, or a combination thereof, which, through the payment of principal, premium, if any, and interest in respect thereof in accordance with their terms, will provide money in an amount sufficient to pay the principal of and any premium and interest on the Notes at Stated Maturity thereof or on earlier redemption in accordance with the terms of the Indenture and the Notes. The Company will also be required, among other things, to deliver to the Trustee an Opinion of Counsel to the effect that Holders of the Notes will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and defeasance were not to occur; and that the resulting trust will not be an "Investment Company" within the meaning of the Investment Company Act of 1940 unless such trust is qualified thereunder or exempt from regulation thereunder. If the Company were to exercise this option and the Notes were declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations so deposited in trust would be sufficient to pay amounts due on the Notes at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Notes upon any acceleration resulting from such Event of Default. In such case, the Company would remain liable for such payments. EVENTS OF DEFAULT AND NOTICE The following are summaries of Events of Default under the Indenture with respect to the Notes: (i) failure to pay any interest on the Notes when due, continued for 30 days; (ii) failure to pay principal of (or premium, if any, on) the Notes when due; (iii) failure to perform any other covenant of the Company or any Subsidiary Guarantor in the Indenture, continued for 60 days after written notice as provided in the Indenture; (iv) the occurrence and continuation beyond any applicable grace period of any default in the payment of the principal of (or premium, if any, on) or interest on any Indebtedness 113 of the Company (other than the Notes) or any Restricted Subsidiary for money borrowed when due (whether resulting from maturity, acceleration, mandatory redemption or otherwise), or any other default causing acceleration of any Indebtedness of the Company or any Restricted Subsidiary for money borrowed, provided that the aggregate principal amount of such Indebtedness shall exceed $5.0 million; (v) one or more final judgments or orders by a court of competent jurisdiction are entered against the Company or any Restricted Subsidiary in an uninsured or unindemnified aggregate amount outstanding at any time in excess of $5.0 million and such judgments or orders are not discharged, waived, stayed, satisfied or bonded for a period of 60 consecutive days; (vi) certain events of bankruptcy, insolvency or reorganization with respect to the Company, or any Restricted Subsidiary that, together with its Subsidiaries, (a) accounted for more than 5% of the consolidated revenues of the Company and its Restricted Subsidiaries, taken as a whole, for the most recently completed fiscal year of the Company, or (b) was the owner of more than 5% of the consolidated assets of the Company and its Restricted Subsidiaries, taken as a whole, at the end of such fiscal year, all as shown in the case of (a) and (b) on the consolidated financial statements of the Company and its Restricted Subsidiaries for such fiscal year; or (vii) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of the Indenture and such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty. The Indenture provides that if an Event of Default (other than an Event of Default described in clause (vi) above) with respect to the Notes at the time outstanding shall occur and be continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Notes by notice as provided in the Indenture may declare the principal amount of the Notes to be due and payable immediately. If an Event of Default described in clause (vi) above with respect to the Notes at the time outstanding shall occur, the principal amount of all the Notes will automatically, and without any action by the Trustee or any Holder, become immediately due and payable. After any such acceleration, but before a judgment or decree based on acceleration, the Holders of at least a majority in aggregate principal amount of the outstanding Notes may, under certain circumstances, rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal (or other specified amount), have been cured or waived as provided in the Indenture. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the Holders of the Notes, unless such Holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Trustee, the Holders of at least a majority in aggregate principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee with respect to the Notes. No Holder of Notes will have any right to institute any proceeding with respect to the Indenture, or for the appointment of a receiver or a trustee, or for any other remedy thereunder, unless (i) such Holder has previously given to the Trustee written notice of a continuing Event of Default with respect to the Notes, (ii) the Holders of at least 25% in aggregate principal amount of the outstanding Notes have made written request, and such Holder or Holders have offered reasonable indemnity, to the Trustee to institute such proceeding as trustee and (iii) the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request, within 60 days after such notice, request and offer. However, such limitations do not apply to a suit instituted by a Holder of Notes for the enforcement of payment of the principal of or any premium or interest on such Notes on or after the applicable due date specified in such Notes. 114 MODIFICATION OF THE INDENTURE; WAIVER The Indenture provides that modifications and amendments of the Indenture may be made by the Company, the Subsidiary Guarantors and the Trustee without the consent of any Holders of Notes in certain limited circumstances, including (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide for the assumption of the obligations of the Company under the Indenture upon the merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole and certain other events specified in the provisions of the Indenture described under "--Merger, Consolidation and Sale of Substantially All Assets," (iii) to provide for uncertificated Notes in addition to or in place of certificated Notes, (iv) to comply with any requirement of the SEC in order to effect or maintain the qualification of the Indenture under the 1939 Act, (v) to make any change that does not adversely affect the rights of any Holder of Notes in any material respect, (vi) to add or remove Subsidiary Guarantors pursuant to the procedure set forth in the Indenture and (vii) certain other modifications and amendments as set forth in the Indenture. The Indenture contains provisions permitting the Company, the Subsidiary Guarantors and the Trustee, with the written consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes, to execute supplemental indentures or amendments adding any provisions to or changing or eliminating any of the provisions of the Indenture or modifying the rights of the Holders of the Notes, except that no such supplemental indenture, amendment or waiver may, without the consent of all the Holders of outstanding Notes, among other things, (i) reduce the principal amount of Notes whose Holders must consent to an amendment or waiver, (ii) reduce the rate of or change the time for payment of interest on any Notes, (iii) change the currency in which any amount due in respect of the Notes is payable, (iv) reduce the principal of or any premium on or change the Stated Maturity of any Notes or alter the redemption or repurchase provisions with respect thereto, (v) reduce the relative ranking of any Notes, (vi) release any security that may have been granted to the Trustee in respect of the Notes (except as contemplated in the documents under which such security was granted to the Trustee) or (vii) make certain other significant amendments or modifications as specified in the Indenture. The Holders of at least a majority in principal amount of the outstanding Notes may waive compliance by the Company with certain restrictive provisions of the Indenture. The Holders of at least a majority in principal amount of the outstanding Notes may waive any past default under the Indenture, except a default in the payment of principal, premium or interest and certain covenants and provisions of the Indenture which cannot be amended without the consent of the Holders of each outstanding Note. NOTICES Notices to Holders of the Notes will be given by mail to the addresses of such Holders as they may appear in the Security Register. GOVERNING LAW The Indenture and the Notes are governed by and construed in accordance with the internal laws of the State of New York without reference to principles of conflicts of law. TRUSTEE Texas Commerce Bank National Association is the initial Trustee under the Indenture. The Trustee maintains normal banking relationships with the Company and its Subsidiaries and may perform certain services for and transact other business with the Company and its Subsidiaries from time to time in the ordinary course of business. 115 DESCRIPTION OF THE OUTSTANDING NOTES The terms of the Outstanding Notes are identical in all material respects to the Exchange Notes, except that the Outstanding Notes have not been registered under the Securities Act, are subject to certain restrictions on transfer and are entitled to certain registration rights under the Registration Agreement (which rights terminate upon the consummation of the Exchange Offer, except under limited circumstances) (see "Description of the Exchange Notes -- Registration Agreement"). In addition, the Outstanding Notes provide that if (i) by July 21, 1997, neither an exchange offer registration statement nor a resale shelf registration statement has been filed, (ii) by September 18, 1997, neither an exchange offer registration statement has been declared effective nor a resale shelf registration statement has been filed, (iii) by October 20, 1997, neither an exchange offer has been consummated nor a resale shelf registration statement has been declared effective or (iv) either the exchange offer registration statement or the resale shelf registration statement has been declared effective and such registration statement ceases to be effective or usable (subject to certain exceptions) in connection with resales of Outstanding Notes during periods specified in the Registration Agreement (each such event referred to in clauses (i) through (iv), a "Registration Default"), interest ("Special Interest") will accrue on the Outstanding Notes (in addition to the stated interest on the Outstanding Notes) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. Special Interest will accrue at a rate of 0.5% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.25% per annum with respect to each subsequent 90-day period, but in no event shall such rate exceed 1.50% per annum. The Exchange Notes are not entitled to any such Special Interest (subject to certain limited exceptions). The Outstanding Notes and the Exchange Notes will constitute a single series of debt securities under the Indenture. See "Description of the Exchange Notes." 116 CERTAIN FEDERAL INCOME TAX CONSIDERATIONS The following summary describes certain United States federal income tax consequences generally applicable to a holder that exchanges Outstanding Notes for Exchange Notes pursuant to the Exchange Offer, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), existing, temporary and proposed Treasury Regulations, Internal Revenue Service ("IRS") rulings and judicial decisions now in effect, all of which are subject to change (possibly with retroactive effect) or different interpretations. This summary deals (i) only with holders ("Holders") that hold Outstanding Notes and will hold Exchange Notes received therefor as "capital assets" (within the meaning of Section 1221 of the Code) and (ii) primarily with Holders that are citizens or residents of the United States, or any state thereof, or a corporation or other entity created or organized under the laws of the United States, or any political subdivision thereof, an estate the income of which is subject to United States federal income tax regardless of source or that is otherwise subject to United States federal income tax on a net income basis in respect of the Notes, or a trust whose administration is subject to the primary supervision of a United States court and which has one or more United States fiduciaries who have the authority to control all substantial decisions of the trust ("U.S. Holders"). This summary does not address tax considerations arising under the laws of any foreign, state or local jurisdiction or applicable to investors that may be subject to special tax rules, such as banks, tax-exempt organizations, insurance companies, dealers in securities or currencies or persons that will hold Notes as a position in a hedging transaction, "straddle" or "conversion transaction" or other integrated investment transaction for tax purposes. The Company has not sought any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions. INVESTORS CONSIDERING THE EXCHANGE OF OUTSTANDING NOTES FOR EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR PARTICIPATION IN THE EXCHANGE OFFER AND THEIR OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, AND THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH TAX CONSEQUENCES. THE EXCHANGE OFFER Pursuant to recently issued Treasury Regulations, the exchange of Outstanding Notes for Exchange Notes pursuant to the Exchange Offer should not constitute a significant modification of the terms of the Notes and, accordingly, such exchange should not be treated as a taxable event for federal income tax purposes. Therefore, such exchange should have no federal income tax consequences to U.S. Holders of Outstanding Notes, and each U.S. Holder of Exchange Notes will continue to be required to include interest on the Exchange Notes in its gross income in accordance with its method of accounting for federal income tax purposes. PAYMENT OF INTEREST AND SPECIAL INTEREST Interest on an Outstanding Note or Exchange Note generally will be includable in the income of a U.S. Holder as ordinary income at the time such interest is received or accrued, in accordance with such U.S. Holder's method of accounting for United States federal income tax purposes. The Outstanding Notes were treated by the Company as issued without original issue discount ("OID") within the meaning of the Code. Had the Company failed to effect the Exchange Offer on a timely basis, Special Interest would have accrued on the Outstanding Notes. Because the Company 117 determined that, when the Outstanding Notes were issued, there was only a remote possibility that events would occur which would cause the Special Interest to accrue on the Outstanding Notes, the Company determined that the Special Interest should not be taken into account in concluding that the Outstanding Notes were issued without OID. SALE, EXCHANGE OR REDEMPTION OF THE NOTES Subject to the discussion of the Exchange Offer above, upon the sale, exchange or redemption of an Outstanding Note or Exchange Note, a U.S. Holder generally will recognize capital gain or loss equal to the difference between (i) the amount of cash proceeds and the fair market value of any property received on the sale, exchange or redemption (except to the extent such amount is attributable to accrued interest income or market discount not previously included in income which is taxable as ordinary income) and (ii) such U.S. Holder's adjusted tax basis in the Outstanding Note or Exchange Note. A U.S. Holder's adjusted tax basis in an Outstanding Note or Exchange Note generally will equal the cost of the Outstanding Note or Exchange Note to such U.S. Holder increased by the amount of interest income on the Outstanding Note or Exchange Note previously taken into income by the U.S. Holder but not yet received by the U.S. Holder and by the amount of any market discount previously taken into income by the U.S. Holder, and reduced by the amount of any bond premium amortized by the U.S. Holder with respect to the Outstanding Notes or Exchange Notes and by any principal payments on the Outstanding Notes or Exchange Notes. Gain or loss realized by a U.S. Holder on the sale, exchange, redemption or other disposition of an Outstanding Note or an Exchange Note generally will be long-term capital gain or loss if the U.S. Holder's holding period in the Outstanding Note or Exchange Note is more than one year at the time of disposition (subject to the market discount rules discussed below). AMORTIZABLE BOND PREMIUM Generally, the excess of a U.S. Holder's tax basis in an Outstanding Note or Exchange Note over the amount payable at maturity is bond premium that the U.S. Holder may elect to amortize under Section 171 of the Code on a yield to maturity basis over the period from the U.S. Holder's acquisition date to the maturity date of the Outstanding Note or Exchange Note. The amortizable bond premium is treated as an offset to interest income on the Outstanding Note or Exchange Note for United States federal income tax purposes. A U.S. Holder who elects to amortize bond premium must reduce its tax basis in the Outstanding Note or Exchange Note by the deductions allowable for amortizable bond premium. An election to amortize bond premium is revocable only with the consent of the IRS and applies to all obligations owned or acquired by the U.S. Holder on or after the first day of the taxable year to which the election applies. An Outstanding Note or Exchange Note may be called or submitted for redemption at a premium prior to maturity. See "Description of the Exchange Notes--Optional Redemption." An earlier call date is treated as the maturity date of the Outstanding Note or Exchange Note and the amount of bond premium is determined by treating the amount payable on such call date as the amount payable at maturity, if such a calculation produces a smaller bond premium than the method described in the preceding paragraph. If a U.S. Holder is required to amortize and deduct the bond premium by reference to a certain call date, the Outstanding Note or Exchange Note will be treated as maturing on that date for the amount then payable. If the Outstanding Note or Exchange Note is not redeemed on that call date, the Outstanding Note or Exchange Note will be treated as reissued on that date for the amount of the call price on that date. If an Outstanding Note or Exchange Note purchased at a premium is redeemed prior to its maturity, a U.S. Holder who has elected to deduct the bond premium may be permitted to deduct any remaining unamortized bond premium as an ordinary loss in the taxable year of the redemption. 118 MARKET DISCOUNT The resale of Outstanding Notes or Exchange Notes may be affected by the market discount provisions of the Code. A U.S. Holder has market discount if an Outstanding Note or Exchange Note is purchased (other than at original issue) at an amount below the stated redemption price at maturity of the Outstanding Note or Exchange Note. A de minimis amount of market discount is ignored. A U.S. Holder of an Outstanding Note or Exchange Note with market discount must either elect to include market discount in income as it accrues or treat a portion of the gain recognized on the disposition or retirement of the Outstanding Note or Exchange Note as ordinary income. The amount of gain treated as ordinary income would equal the lesser of (i) the gain recognized (or the appreciation, in the case of a nontaxable transaction such as a gift) or (ii) the portion of the market discount that accrued on a ratable basis (or, if elected, on a constant interest rate basis) while the Outstanding Note or Exchange Note was held by the U.S. Holder. A U.S. Holder who acquires an Outstanding Note or Exchange Note at a market discount also may be required to defer a portion of any interest expense that otherwise may be deductible on any indebtedness incurred or maintained to purchase or carry such Outstanding Note or Exchange Note until the U.S. Holder disposes of the Outstanding Note or Exchange Note in a taxable transaction. Moreover, to the extent of any accrued market discount on such Outstanding Note or Exchange Note, any partial principal payment with respect to an Outstanding Note or Exchange Note will be includible as ordinary income upon receipt, as will the fair market value of the Outstanding Note or Exchange Note on certain otherwise non-taxable transfers (such as gifts). A U.S. Holder of Outstanding Notes or Exchange Notes acquired at a market discount may elect for United States federal income tax purposes to include market discount in gross income as the discount accrues, either on a straight- line basis or on a constant interest rate basis. This current inclusion election, once made, applies to all market discount obligations acquired by the U.S. Holder on or after the first day of the first taxable year to which the election applies, and may not be revoked without the consent of the IRS. If a U.S. Holder of Outstanding Notes or Exchange Notes makes such an election, the foregoing rules with respect to the recognition of ordinary income on sales and other dispositions of such debt instruments and on any partial principal payment with respect to the Outstanding Notes or Exchange Notes, and the deferral of interest deductions on indebtedness incurred or maintained to purchase or carry such debt instruments, would not apply. NON-U.S. HOLDERS Under present United States federal income and estate tax law and subject to the discussion of backup withholding below: (a) Payments of interest on the Outstanding Notes or the Exchange Notes by the Company or any agent of the Company to any holder of an Outstanding Note or an Exchange Note that is not a U.S. Holder (a "Non-U.S. Holder") will not be subject to United States federal withholding tax, provided that such interest income is not effectively connected with a United States trade or business of the Non-U.S. Holder and provided that (i) the Non-U.S. Holder does not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote; (ii) the Non-U.S. Holder is not a controlled foreign corporation that is related to the Company through stock ownership; (iii) either (A) the beneficial owner of the Outstanding Notes or the Exchange Notes certifies (by submitting to the Company or its agent a Form W-8 (or a suitable substitute form)) in compliance with applicable laws and regulations to the Company or its agent, under penalties of perjury, that it is not a "United States person" as defined in the Code and provides its name and address or (B) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business (a "financial institution"), that holds the Outstanding Notes on behalf of the beneficial 119 owner, and that provides a statement to the Company or its agent in which it certifies that a Form W-8 (or a suitable substitute form) has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes the payor with a copy thereof; and (iv) the Non-U.S. Holder is not a bank which acquired the Outstanding Notes or Exchange Notes in consideration for an extension of credit made pursuant to a loan agreement entered into the ordinary course of business. A Non-U.S. Holder that is not exempt from tax under these rules will be subject to United States federal income tax withholding at a rate of 30% unless the interest is effectively connected with the conduct of a United States trade or business, in which case the interest will be subject to the United States federal income tax on net income that applies to United States persons generally. Non-U.S. Holders should consult applicable income tax treaties, which may include different rules. (b) A Non-U.S. Holder will generally not be subject to United States federal withholding tax on gain realized on the sale, exchange or redemption of an Outstanding Note or an Exchange Note unless (i) the gain is effectively connected with a United States trade or business of the Non- U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an individual, such Holder is present in the United States for a period or periods aggregating 183 days or more during the taxable year of the disposition or (iii) the Holder is subject to tax pursuant to the provisions of the Code applicable to certain United States expatriates. If the Company is a "United States real property holding corporation" within the meaning of the Code, a Non-U.S. Holder may be subject to United States federal income tax with respect to gain realized on the disposition, which tax may be required to be withheld. The amount withheld in accordance with these rules will be creditable against the Non-U.S. Holder's United States federal income tax liability and may entitle the Non-U.S. Holder to a refund upon furnishing the required information to the IRS. Non-U.S. Holders should consult applicable income tax treaties, which may provide different rules. (c) An Outstanding Note or an Exchange Note held by an individual who at the time of death is not a citizen or resident of the United States will not be subject to United States federal estate tax as a result of such individual's death if, at the time of such death, the individual did not actually or constructively own 10% or more of the total combined voting power of all classes of stock of the Company entitled to vote and the income on the Outstanding Notes or the Exchange Notes would not have been effectively connected with the conduct of a trade or business by the individual in the United States. Recently proposed Treasury regulations that would be effective January 1, 1998, provide for several alternative methods for Non-U.S. Holders or "qualified intermediaries" who hold the Outstanding Notes or the Exchange Notes on behalf of Non-U.S. Holders to obtain an exemption from withholding on interest payments. The proposed Treasury regulations also would require, in the case of Outstanding Notes or Exchange Notes held by a foreign partnership, that (i) the certification described in clause (a) (iii) of the preceding paragraph be provided by the partners rather than by the foreign partnership and (ii) the partnership provide certain information to the payor, including a United States taxpayer identification number. A look-through rule would apply in the case of tiered partnerships. There can be no assurance as to whether the proposed Treasury regulations will be adopted or as to the provisions that they will include if and when adopted in temporary or final form. Except to the extent that an applicable treaty otherwise provides, a Non- U.S. Holder generally will be taxed in the same manner as a U.S. Holder with respect to interest if the interest income is effectively connected with a United States trade or business of the Non-U.S. Holder. Effectively connected interest received by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional "branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate). Even through such effectively connected interest is subject to income tax, and may be subject to the branch profits tax, it is not subject to withholding tax if the Non-U.S. Holder delivers a properly executed IRS Form 4224 to the payor. 120 INFORMATION REPORTING AND BACKUP WITHHOLDING TAX In general, information reporting requirements may apply to principal and interest payments on an Outstanding Note or Exchange Note and to payments of the proceeds of the sale of an Outstanding Note or Exchange Note. A 31% backup withholding tax may apply to such payments unless the Holder (i) is a corporation, Non-U.S. Holder or comes within certain other exempt categories and, when required, demonstrates its exemption, or (ii) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A Holder of an Outstanding Note or Exchange Note who does not provide the Company with the Holder's correct taxpayer identification number may be subject to penalties imposed by the IRS. Any amounts withheld under the backup withholding rules from a payment to a Holder will be allowed as a credit against such Holder's United States federal income tax, provided that the required information is furnished to the IRS. 121 PLAN OF DISTRIBUTION Based on interpretations of the staff of the Division of Corporation Finance of the SEC set forth in no-action letters issued to third parties, the Company believes that, except as described below, Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by the respective holders thereof without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that (i) such Exchange Notes are acquired in the ordinary course of such holder's business and (ii) such holder does not intend to participate in, and is not engaged in and does not intend to engage in, a distribution of the Exchange Notes. A holder of Outstanding Notes that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act or that is a broker-dealer that purchased Outstanding Notes from the Company to resell pursuant to an exemption from registration (a) cannot rely on such interpretations by the staff of the Division of Corporation Finance of the SEC, (b) will not be permitted or entitled to tender such Outstanding Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of such Outstanding Notes. In addition, any holder who tenders Outstanding Notes in the Exchange Offer with the intention or for the purpose of participating in a distribution of the Exchange Notes cannot rely on such interpretations by the staff of the Division of Corporation Finance of the SEC and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Unless an exemption from registration is otherwise available, any such resale transaction should be covered by an effective registration statement containing selling security holders information required by Item 507 of Regulation S-K under the Securities Act. Each holder of Outstanding Notes who wishes to exchange its Outstanding Notes for Exchange Notes in the Exchange Offer will be required to make certain representations to the Company set forth in "The Exchange Offer -- Procedures for Tendering Outstanding Notes." To date, the staff of the Division of Corporation Finance of the SEC has taken the position that a broker-dealer that has acquired securities in exchange for securities that were acquired by such broker-dealer as a result of market-making activities or other trading activities may fulfill its prospectus delivery requirements with the prospectus contained in an exchange offer registration statement. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Outstanding Notes where such Outstanding Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of up to 90 days after the consummation of the Exchange Offer, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit from any such resale of Exchange Notes and any commissions or concessions received by any such person may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 122 For a period of 90 days after the date the Exchange Offer is consummated, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay the expenses incident to the Exchange Offer, other than any discounts or commissions incurred upon the sale of the Notes. The Company will indemnify the holders of the Outstanding Notes offered pursuant to a resale shelf registration statement and each Participating Broker-Dealer selling Exchange Notes during a period not to exceed 90 days after the consummation of the Exchange Offer against certain liabilities, including liabilities under the Securities Act. The Company has agreed with the Initial Purchasers not to offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any debt securities issued or guaranteed by the Company (other than the Notes) for a period expiring on October 18, 1997, without the prior written consent of Salomon Brothers Inc. 123 LEGAL MATTERS The validity of the Exchange Notes issued pursuant to the Exchange Offer will be passed upon for the Company by Thompson & Knight, A Professional Corporation, Dallas, Texas. EXPERTS The Company's audited Consolidated Financial Statements at December 31, 1996, 1995 and 1994, included in this Prospectus have been audited by Arthur Andersen LLP, independent auditors, as stated in their report appearing herein. The information set forth in this Prospectus relating to the Company's proved reserves, estimated future net revenues and Present Values is taken from the respective reports of DeGolyer and MacNaughton (with respect to the Company's United States properties) and Gilbert Lausten Jung Associates Ltd. (with respect to the Company's Canadian properties), each of which is a firm of independent petroleum engineers. 124 AVAILABLE INFORMATION The Company is currently subject to the periodic reporting and other informational requirements of the Exchange Act and in accordance therewith files reports, proxy statements and other information with the SEC. Such reports, proxy statements and other information may be inspected and copied at the public reference facilities of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following Regional Offices: Seven World Trade Center, Suite 1300, New York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained from the SEC by mail at prescribed rates. Requests should be directed to the SEC's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The SEC also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information. The Company's common stock is listed on the New York Stock Exchange. Reports, proxy and information statements and other information relating to the Company can be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005. In addition, for so long as any of the Outstanding Notes remains outstanding, the Company and the Subsidiary Guarantors have agreed to make available to any prospective purchaser of the Outstanding Notes or beneficial owner of the Outstanding Notes in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. This Prospectus constitutes a part of a registration statement on Form S-4 (the "Registration Statement") filed by the Company and the Initial Subsidiary Guarantors with the SEC under the Securities Act. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC, and reference is hereby made to the Registration Statement and to the exhibits relating thereto for further information with respect to the Company and the Notes. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to a copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such reference. 125 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's Annual Report on Form 10-K for the year ended December 31, 1996, Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, Current Report on Form 8-K filed with the SEC on May 28, 1997 (Date of Event: May 22, 1997) and definitive Proxy Statement relating to its 1997 annual meeting of stockholders are incorporated by reference in this Prospectus. All documents filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the Exchange Offer shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained herein or in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that such statement is modified or replaced by a statement contained in this Prospectus or in any other subsequently filed document that also is or is deemed to be incorporated by reference in this Prospectus. Any such statement so modified or superseded shall not be deemed, except as so modified or replaced, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom a copy of this Prospectus has been delivered, upon the written or oral request of any such person, a copy of any or all of the documents referred to above that have been or may be incorporated in this Prospectus by reference (other than exhibits to such documents unless the exhibits are specifically incorporated by reference in this Prospectus). Written or oral requests for such copies should be directed to The Wiser Oil Company, 8115 Preston Road, Suite 400, Dallas, Texas 75225, Attention: Corporate Secretary, Telephone (214) 265-0080. 126 GLOSSARY OF OIL AND GAS TERMS The following are abbreviations and definitions of terms commonly used in the oil and gas industry that are used in this Prospectus. "BBL" means a barrel of 42 U.S. gallons. "BCF" means billion cubic feet. "BOE" means barrels of oil equivalent, converting volumes of natural gas to oil equivalent volumes using a ratio of six Mcf of natural gas to one Bbl of oil. "COMPLETION" means the installation of permanent equipment for the production of oil or gas. "DEVELOPMENT WELL" means a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. "DRY HOLE" OR "DRY WELL" means a well found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of such production exceed production expenses and taxes. "EXPLORATORY WELL" means a well drilled to find and produce oil or gas reserves not classified as proved, to find a new production reservoir in a field previously found to be productive of oil or gas in another reservoir or to extend a known reservoir. "FARM-IN" means an agreement pursuant to which the owner of a working interest in an oil and gas lease assigns the working interest or a portion thereof to another party who desires to drill on the leased acreage. Generally, the assignee is required to drill one or more wells in order to earn its interest in the acreage. The assignor usually retains a royalty or reversionary interest in the lease. The interest received by an assignee is a "farm-in." "GROSS" when used with respect to acres or wells, refers to the total acres or wells in which the Company has a working interest. "INFILL DRILLING" means drilling of an additional well or wells provided for by an existing spacing order to more adequately drain a reservoir. "MBBL" means thousand Bbls. "MBOE" means thousand BOE. "MCF" means thousand cubic feet. "MMBOE" means million BOE. "MMBTU" means one million British Thermal Units. British Thermal Unit means the quantity of heat required to raise the temperature of one pound of water by one degree Fahrenheit. "MMCF" means million cubic feet. "NET" when used with respect to acres or wells, refers to gross acres or wells multiplied, in each case, by the percentage working interest owned by the Company. "NET PRODUCTION" means production that is owned by the Company less royalties and production due others. 127 "NGL" means natural gas liquid. "OPERATOR" means the individual or company responsible for the exploration, development and production of an oil or gas well or lease. "PRESENT VALUE" when used with respect to oil and gas reserves, means the estimated future gross revenues to be generated from the production of proved reserves calculated in accordance with the guidelines of the SEC, net of estimated production and future development costs, using prices and costs as of the date of estimation without future escalation (except to the extent a contract specifically provides otherwise), without giving effect to non- property related expenses such as general and administrative expenses, debt service, future income tax expense and depreciation, depletion and amortization, and discounted using an annual discount rate of 10%. "PRODUCTIVE WELLS" OR "PRODUCING WELLS" consist of producing wells and wells capable of production, including wells waiting on pipeline connections. "PROVED DEVELOPED RESERVES" means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. Additional oil and gas expected to be obtained through the application of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary recovery will be included as "proved developed reserves" only after testing by a pilot project or after the operation of an installed program has confirmed through production response that increased recovery will be achieved. "PROVED RESERVES" means the estimated quantities of crude oil, natural gas and NGLs which upon analysis of geological and engineering data appear with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not on escalations based upon future conditions. (i) Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation tests. The area of a reservoir considered proved includes (A) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and (B) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir. (ii) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are included in the "proved" classification when successful testing by a pilot project, or the operation of an installed program in the reservoir, provides support for the engineering analysis on which the project or program was based. (iii) Estimates of proved reserves do not include the following: (A) oil that may become available from known reservoirs but is classified separately as "indicated additional reserves"; (B) crude oil, natural gas and NGLs, the recovery of which is subject to reasonable doubt because of uncertainty as to geology, reservoir characteristics or economic factors; (C) crude oil, natural gas, and NGLs, that may occur in undrilled prospects; and (D) crude oil, natural gas and NGLs that may be recovered from oil shales, coal, gilsonite and other such resources. "PROVED UNDEVELOPED RESERVES" means reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for completion. Reserves on undrilled acreage shall be limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Proved reserves for other undrilled units can be claimed only where it can be demonstrated with certainty that there is continuity of production from the existing productive formation. Under no circumstances should estimates for proved 128 undeveloped reserves be attributable to any acreage for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by actual tests in the area and in the same reservoir. "RECOMPLETION" means the completion for production of an existing well bore in another formation from that in which the well has been previously completed. "RESERVES" means proved reserves. "RESERVOIR" means a porous and permeable underground formation containing a natural accumulation of producible oil and/or gas that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs. "ROYALTY" means an interest in an oil and gas lease that gives the owner of the interest the right to receive a portion of the production from the leased acreage (or of the proceeds of the sale thereof), but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner's royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner. "2-D SEISMIC" means an advanced technology method by which a cross-section of the earth's subsurface is created through the interpretation of reflecting seismic data collected along a single source profile. "3-D SEISMIC" means an advanced technology method by which a three dimensional image of the earth's subsurface is created through the interpretation of reflection seismic data collected over surface grid. 3-D seismic surveys allow for a more detailed understanding of the subsurface than do conventional surveys and contribute significantly to field appraisal, development and production. "WORKING INTEREST" means an interest in an oil and gas lease that gives the owner of the interest the right to drill for and produce oil and gas on the leased acreage and requires the owner to pay a share of the costs of drilling and production operations. The share of production to which a working interest owner is entitled will generally be smaller than the share of costs that the working interest owner is required to bear, with the balance of the production accruing to the owners of royalties. "WORKOVER" means operations on a producing well to restore or increase production. 129 THE WISER OIL COMPANY INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Public Accountants................................... F-2 Consolidated Statements of Income and Retained Earnings.................... F-3 Consolidated Balance Sheets................................................ F-4 Consolidated Statements of Cash Flows...................................... F-5 Notes to Consolidated Financial Statements................................. F-6
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders of The Wiser Oil Company: We have audited the accompanying consolidated balance sheets of The Wiser Oil Company (a Delaware corporation) and subsidiaries as of December 31, 1996, 1995 and 1994 and the related consolidated statements of income and retained earnings and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Wiser Oil Company and subsidiaries as of December 31, 1996, 1995 and 1994 and the results of their operations and their cash flows in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, during 1995, the Company changed its method of accounting for the impairment of long- lived assets. ARTHUR ANDERSEN LLP Dallas, Texas, February 18, 1997 F-2 THE WISER OIL COMPANY CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 AND THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ---------------- ------------------------- 1997 1996 1996 1995 1994 ------- ------- ------- ------- ------- (UNAUDITED) (IN THOUSANDS EXCEPT PER SHARE DATA) Revenues: Oil and gas sales............... $23,062 $16,233 $72,012 $54,400 $53,559 Dividends and interest.......... 121 212 683 1,241 1,641 Marketable security sales gains.......................... 1,813 2,005 12,977 13,101 7,475 Other........................... 579 117 1,017 2,939 2,681 ------- ------- ------- ------- ------- 25,575 18,567 86,689 71,681 65,356 ------- ------- ------- ------- ------- Costs and Expenses: Production and operating........ 6,802 5,623 23,970 20,690 22,313 Purchased natural gas........... 513 353 1,462 727 759 Depreciation, depletion and am- ortization..................... 5,767 4,954 19,653 19,778 18,313 Property impairments............ -- -- 12,112 4,893 -- Exploration..................... 621 1,266 4,176 5,801 4,130 General and administrative...... 2,378 2,795 9,364 8,193 6,502 Interest expense................ 1,264 1,360 5,452 5,618 3,907 ------- ------- ------- ------- ------- 17,345 16,351 76,189 65,700 55,924 ------- ------- ------- ------- ------- Income Before Income Taxes........ 8,230 2,216 10,500 5,981 9,432 Income Tax Expense................ 2,089 705 4,072 3,788 444 ------- ------- ------- ------- ------- NET INCOME........................ 6,141 1,511 6,428 2,193 8,988 Retained Earnings, beginning of period........................... 66,385 61,030 61,030 62,414 57,002 Dividends Paid.................... (268) (268) (1,073) (3,577) (3,576) ------- ------- ------- ------- ------- Retained Earnings, end of period.. $72,258 $62,273 $66,385 $61,030 $62,414 ======= ======= ======= ======= ======= Average Outstanding Shares........ 8,949 8,939 8,954 8,939 8,941 ======= ======= ======= ======= ======= Earnings Per Share................ $ .69 $ .17 $ .72 $ .25 $ 1.01 ======= ======= ======= ======= ======= Cash Dividends Per Share.......... $ .03 $ .03 $ .12 $ .40 $ .40 ======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements. F-3 THE WISER OIL COMPANY CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 31, ------------------------------ 1997 1996 1995 1994 ----------- --------- --------- -------- (UNAUDITED) (IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents........ $ 2,116 $ 5,870 $ 1,397 $ 2,714 Accounts receivable.............. 13,460 14,091 10,426 10,900 Inventories...................... 1,512 1,289 1,517 1,144 Prepaid expenses................. 1,455 473 833 852 --------- --------- --------- -------- Total current assets........... 18,543 21,723 14,173 15,610 --------- --------- --------- -------- Marketable Securities.............. 5,748 7,176 19,592 27,337 Property, Plant and Equipment, at cost: Oil and gas properties (successful efforts method)..... 317,472 306,716 265,692 250,156 Other properties................. 5,601 4,974 4,422 5,443 --------- --------- --------- -------- 323,073 311,690 270,114 255,599 Accumulated depreciation and de- pletion......................... (137,730) (131,972) (101,025) (88,228) --------- --------- --------- -------- Net Property, Plant and Equipment.. 185,343 179,718 169,089 167,371 Other Assets....................... 148 -- 553 473 --------- --------- --------- -------- $ 209,782 $ 208,617 $ 203,407 $210,791 ========= ========= ========= ======== LIABILITIES AND STOCKHOLDERS' EQ- UITY Current Liabilities: Accounts payable................. $ 11,359 $ 14,996 $ 10,143 $ 9,562 Accrued income taxes............. 2,220 1,697 1,527 1,518 Accrued liabilities.............. 1,373 1,537 1,449 2,139 Current portion of long term debt............................ -- -- 20 78 --------- --------- --------- -------- Total current liabilities...... 14,952 18,230 13,139 13,297 --------- --------- --------- -------- Long Term Debt..................... 76,908 78,654 74,171 78,013 Deferred Benefit Cost.............. 1,619 1,496 1,120 1,052 Deferred Income Taxes.............. 11,879 10,975 12,699 13,002 Other Long Term Liabilities........ -- -- 1,146 -- Stockholders' Equity: Common stock--$3 par value 20,000,000 shares authorized; 9,125,044 shares is- sued at March 31, 1997 and 9,115,572 shares issued at De- cember 31, 1996, 1995 and 1994, respectively; 8,948,840 shares outstanding at March 31, 1997 and 8,939,368 shares outstanding at December 31, 1996, 1995 and 1994, respectively.............. 27,375 27,347 27,347 27,347 Paid-in capital.................. 3,194 3,078 3,078 3,078 Retained earnings................ 72,258 66,385 61,030 62,414 Marketable securities valuation adjustment...................... 3,462 4,328 11,684 16,013 Foreign currency translation..... 864 853 722 (696) Treasury stock; 176,204 shares, at cost at March 31, 1997 and December 31, 1996, 1995 and 1994............................ (2,729) (2,729) (2,729) (2,729) --------- --------- --------- -------- Total stockholders' equity..... 104,424 99,262 101,132 105,427 --------- --------- --------- -------- $ 209,782 $ 208,617 $ 203,407 $210,791 ========= ========= ========= ========
The accompanying notes are an integral part of these financial statements. F-4 THE WISER OIL COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 AND THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, --------------- ---------------------------- 1997 1996 1996 1995 1994 ------- ------ -------- -------- -------- (UNAUDITED) (IN THOUSANDS) Cash Flows From Operating Ac- tivities: Net income..................... $ 6,141 $1,511 $ 6,428 $ 2,193 $ 8,988 Adjustments to reconcile net income to operating cash flows: Depreciation, depletion and amortization................ 5,767 4,954 19,653 19,778 18,313 Deferred income taxes........ 1,350 231 2,056 1,914 (1,145) Marketable securities & prop- erty sale gains............. (2,283) (2,044) (13,099) (14,092) (9,367) Foreign currency transla- tion........................ 11 (13) (2) (34) 87 Property impairments and abandonments................ 245 1,022 15,229 9,392 2,930 Other Changes-- Accounts receivable........ 631 (742) (3,665) 474 (1,473) Inventories................ (223) 100 228 (373) (344) Prepaid expenses........... (982) (104) 360 19 (204) Other assets............... (148) 34 553 (80) 11 Accounts payable........... (3,637) 401 4,853 661 3,438 Accrued income taxes....... 523 (279) 170 9 1,516 Accrued liabilities........ (164) 176 88 (690) 424 Deferred benefits cost..... 123 124 376 68 (40) ------- ------ -------- -------- -------- Operating Cash Flows..... 7,354 5,371 33,228 19,239 23,134 ------- ------ -------- -------- -------- Cash Flows From Investing Ac- tivities: Additions to property, plant and equipment............... (12,725) (8,926) (46,056) (28,851) (73,410) Proceeds from sales of prop- erty, plant and equipment... 1,558 51 1,022 1,280 13,581 Proceeds from marketable se- curity sales................ 1,929 2,178 14,035 14,492 8,250 ------- ------ -------- -------- -------- Investing Cash Flows....... (9,238) (6,697) (30,999) (13,079) (51,579) ------- ------ -------- -------- -------- Cash Flows From Financing Ac- tivities: Long term debt issued........ 22,163 10,122 25,508 11,170 55,600 Payments on long term debt and other liabilities................. (23,909) (7,165) (22,191) (15,070) (24,364) Common stock issued.......... 144 -- -- -- -- Dividends paid............... (268) (268) (1,073) (3,577) (3,576) ------- ------ -------- -------- -------- Financing Cash Flows....... (1,870) 2,689 2,244 (7,477) 27,660 ------- ------ -------- -------- -------- Net Increase (Decrease) In Cash.......................... (3,754) 1,363 4,473 (1,317) (785) Cash and Cash Equivalents, beginning of period........... 5,870 1,397 1,397 2,714 3,499 ------- ------ -------- -------- -------- Cash and Cash Equivalents, end of period..................... $ 2,116 $2,760 $ 5,870 $ 1,397 $ 2,714 ======= ====== ======== ======== ========
The accompanying notes are an integral part of these financial statements. F-5 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Principles of Consolidation--The consolidated financial statements include the accounts of The Wiser Oil Company (the "Company"), a Delaware corporation, and its wholly owned subsidiaries: T.W.O.C., Inc., The Wiser Marketing Company, Maljamar Wiser Inc., Maljamar Development Partnership, L.P., and The Wiser Oil Company of Canada ("Wiser Canada"). T.W.O.C., Inc. is a Delaware holding company responsible for the management of investment activities. The Wiser Marketing Company functions as a natural gas marketer and broker. Maljamar Wiser Inc. was formed in 1995 and is a wholly owned subsidiary of the Company. It was formed in order for the Company to fund its $53,000,000 development of the Maljamar area with the use of nonrecourse debt. The Maljamar Development Partnership, L.P. was formed in 1995 for the same reason. The Company is the limited partner of the Maljamar Development Partnership, L.P. and owns 99% of the partnership. Maljamar Wiser Inc. owns 1% of the Maljamar Development Partnership, L.P. as a general partner. Wiser Canada was formed in 1994 to conduct the Company's Canadian activities. Prior to the formation of Wiser Canada, the Company's oil and gas operations were conducted primarily in the United States. Intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to conform prior years' amounts to current presentation. b. Risks and Uncertainties--The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. c. Oil and Gas Properties--The Company is engaged in the exploration and development of oil and gas in the United States and Canada. The Company follows the "successful efforts" method of accounting for its oil and gas properties. Under this method of accounting, all costs of property acquisitions and exploratory wells are initially capitalized. If an exploratory well is unsuccessful, the capitalized costs of drilling the well, net of any salvage value, are charged to expense. The capitalized costs of unproven properties are periodically assessed to determine whether their value has been impaired, and if such impairment is indicated, a loss is recognized. Geological and geophysical costs and the costs of retaining undeveloped properties are expensed as incurred. Expenditures for maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Upon disposal, the asset and related accumulated depreciation, depletion and amortization are removed from the accounts, and any resulting gain or loss is reflected currently in income. Prior to 1995, the Company evaluated the carrying value of its oil and gas properties based on undiscounted future net revenues on a company wide basis. During 1995, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires the Company to assess the need for an impairment of capitalized costs of oil and gas properties on a property-by-property basis. If an impairment is indicated based on undiscounted expected future cash flows, then an impairment is recognized to the extent that net capitalized costs exceed discounted future cash flows. During 1996 and 1995, the Company provided impairments of $12,112,000 and $4,893,000, respectively. Management's estimate of future cash flows is based on their estimate of reserves and prices. It is reasonably possible that a change in reserve or price estimates could occur in the near term and adversely impact management's estimate of future cash flows and consequently the carrying value of properties. F-6 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) d. Depreciation and Depletion--Depreciation and depletion of the capitalized costs of producing oil and gas properties are computed for individual properties using the units-of-production method based on total proved reserves. Depreciation of transportation, office and other properties is computed generally using the straight-line method over the estimated useful lives of these assets. e. Cash and Cash Equivalents--Cash equivalents generally consist of short- term investments maturing in three months or less from the date of acquisition. These investments of $3,801,000 in 1996, $504,000 in 1995 and $1,662,000 in 1994 are recorded at cost plus accrued interest, which approximates market. f. Inventories--Oil and gas product inventories are recorded at the average cost of production. Materials and supplies are recorded at the lower of average cost or market. g. Accrued Liabilities--Accrued liabilities include accrued vacation and payroll of $576,000 in 1996, $535,000 in 1995 and $519,000 in 1994. h. Postretirement Benefits--SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," has no significant impact on the Company. The Company has no significant liabilities for postretirement benefits, other than pensions, and has historically recognized such liabilities as they are incurred. i. Gas Imbalances--Gas imbalances are accounted for using the sales method. The Company's net imbalance position is not material at December 31, 1996, 1995 and 1994. j. Hedging Arrangements--During 1995 and 1996, the Company entered into numerous oil price collar agreements to hedge against price fluctuations during 1997. The Company is exposed to losses in the event of nonperformance by the counter parties to its hedging agreements. These arrangements are summarized as follows:
DAILY VOLUME FLOOR PRICE CEILING PRICE BEGINNING DATES ENDING DATE (BBLS) (PER BBL) (PER BBL) - --------------- ----------- ------------ ----------- ------------- January 1, 1997 December 31, 1997 1,000 $16.00 $18.85 January 1, 1997 December 31, 1997 1,000 21.80(1) 25.55(1) January 1, 1997 March 31, 1997 2,000 16.00 19.41 April 1, 1997 June 30, 1997 2,000 17.00 19.00 July 1, 1997 September 30, 1997 2,000 17.00 19.00
- -------- (1)Canadian Dollars In addition, the Company has hedged 367 barrels per day of natural gas liquids production from January 1, 1997 to March 31, 1997 at a weighted average price of $18.76 per barrel. Gains or losses from hedging transactions are recognized as oil and gas sales in the accompanying Consolidated Statements of Income and Retained Earnings as the underlying hedged production is sold. As of December 31, 1994, the Company had deferred $135,017 in net gains related to hedging activities. As of December 31, 1996 and 1995, the Company had no deferred net gains or net losses related to hedging activities. During 1996, revenues from oil and gas production were reduced $6,923,000 as a result of hedging activities. The Company did not incur any material hedging gains or losses in 1995 or 1994. F-7 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) k. Foreign Currency Translation--The functional currency of Wiser Canada is the Canadian dollar. In accordance with SFAS No. 52, "Foreign Currency Translation," Wiser Canada's financial statements have been translated from Canadian dollars to U.S. dollars with the cumulative translation adjustment gain of $853,000 for 1996, $722,000 for 1995 and a loss of $696,000 for 1994 classified in Stockholders' Equity. 2. MARKETABLE SECURITIES During 1993, the Company adopted the accounting procedures as established by SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Under SFAS No. 115, marketable securities, such as those owned by the Company, are classified as available-for-sale securities and are to be reported at market value, with unrealized gains and losses, net of income taxes, excluded from earnings and reported as a separate component of stockholders' equity. The market value of these securities at December 31, 1996, 1995 and 1994 were $7,176,000, $19,592,000 and $27,337,000 respectively. The Company liquidated a portion of its marketable securities portfolio and recognized a pretax gain of $12,977,000, $13,101,000 and $7,475,000 for 1996, 1995 and 1994 respectively. 3. LONG TERM DEBT On June 23, 1994, the Company entered into a Credit Agreement with NationsBank of Texas, N.A. as agent, which provides for a term loan to Wiser Canada and a revolving credit facility to the Company. The Credit Agreement provides the Company with up to a $150 million line of credit through September 30, 2000. The amounts available for borrowing are determined under formulas related to oil and gas reserves. The Company's borrowing base at December 31, 1996 was $80,000,000. The indebtedness outstanding under the Credit Agreement is secured by a pledge of 66% of the Company's ownership interests in Wiser Canada. Available loan and interest options are base rate loans, at the bank's prime interest rate and one to six month term loans with fixed interest at either the LIBOR or CD rate plus 0.625%. The average interest rate during 1996 under the Credit Agreement was 6.04%. A 0.25% commitment fee is paid on the unused borrowing base. The Credit Agreement requires the Company to, among other things, maintain certain minimum net worth and current ratio requirements as well as certain restrictions on sales of assets, payment of dividends, incurrence of indebtedness and hedged transactions. On November 29, 1995, the Company entered into a credit agreement with NationsBank of Texas, N.A. as agent (the "Maljamar Credit Facility"). The Maljamar Credit Facility provides the Company with up to a $50 million nonrecourse facility to develop the expanded Maljamar project area. The amounts available for borrowing are determined under formulas related to oil and gas reserves and capital spent on the Maljamar area properties offset by net operating income from these same properties. The Company's borrowing base at December 31, 1996 was $40,000,000. Available loan and interest options are base rate loans, at the bank's prime interest rate and one to six month term loans with fixed interest at LIBOR plus 2.0%. The average interest rate during 1996 under the Maljamar Credit Facility was 7.51%. A 0.375% commitment fee is paid on the unused borrowing base. The Maljamar Credit Facility requires the Company to, among other things, maintain certain minimum collateral value requirements as well as certain restrictions on sales of assets, payment of dividends and incurrence of indebtedness. In addition, the credit agreement also requires the Company to hedge a portion of its crude oil production. The Company paid $4,971,000 in interest during 1996, $5,618,000 during 1995, and $3,889,000 during 1994. F-8 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Long term debt consists of the following (in thousands):
DECEMBER 31, ------------------------ 1996 1995 1994 ------- ------- ------- Maljamar Credit Facility--7.63% and 7.94% interest rate at December 31, 1996 and 1995, respectively.... $20,654 $ 1,171 $ -- Credit Agreement--6.31%, 6.38% and 6.56% interest rate at December 31, 1996, 1995 and 1994, respectively ....................................... 58,000 73,000 78,000 Other, at 11.00%..................................... -- 20 91 ------- ------- ------- 78,654 74,191 78,091 Less current maturities.............................. -- (20) (78) ------- ------- ------- $78,654 $74,171 $78,013 ======= ======= =======
The annual requirements for reduction of principal of long term debt outstanding as of December 31, 1996 are estimated as follows (in thousands): 1997...................................... $ -- 1998...................................... 20,654 1999...................................... 7,998 2000...................................... 10,664 Thereafter................................ 39,338 ------- $78,654 =======
4. PROPERTY ACQUISITIONS AND SALES During 1995, the Company traded some of its Permian Basin properties for properties located mainly in New Mexico (The Skelly Unit) and West Virginia. The acquisition of these properties was accounted for as an exchange of similar assets. As a result of these trades, Wiser's total proved reserves as of December 31, 1995 increased by 5,846,000 BOE. On June 24, 1994, the Company acquired the Eagle Properties, which consist of certain oil and gas properties located in Alberta, Canada, for $52 million dollars. The purchase was funded through the Company's Credit Agreement, see Note 3, and with existing cash and cash equivalents. The purchase method of accounting was followed. Unaudited pro forma results of operations, as if the 1994 acquisition of the Eagle Properties took place at January 1, 1994, are as follows (in thousands):
1994(1) ------- Revenues.................................. $63,888 Expenses.................................. 57,341 ------- Net Income................................ $ 6,547 ======= Earnings per share........................ $ .73 =======
- -------- (1) The pro forma results exclude the gain of $1.9 million of property sales recognized in 1994. F-9 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. INCOME TAXES The Company provides deferred income taxes for differences between the tax reporting basis and the financial reporting basis of assets and liabilities. The Company follows the accounting procedures as established by SFAS No. 109, "Accounting for Income Taxes." The Company paid $900,000 in 1996, $1,967,000 in 1995 and $0 income taxes in 1994. Income tax expense (benefit) for the three years ended December 31, 1996 were as follows (in thousands):
1996 1995 1994 ------ ------ ------- Current: Federal............................................. $1,911 $1,607 $ 1,473 State............................................... 105 150 116 ------ ------ ------- 2,016 1,757 1,589 ------ ------ ------- Deferred: Federal............................................. 1,919 1,934 1,085 State............................................... 137 97 107 Reversal of valuation allowance..................... -- -- (2,337) ------ ------ ------- 2,056 2,031 (1,145) ------ ------ ------- Total income tax expense.............................. $4,072 $3,788 $ 444 ====== ====== =======
A reconciliation of the statutory federal income tax rate to the Company's effective tax rate follows:
1996 1995 1994 ----- ----- ----- Statutory federal income tax rate....................... 34.0% 34.0% 34.0% Statutory depletion in excess of cost basis............. (2.0) (1.7) (2.2) Non-deductibility of foreign operating loss............. 22.6 55.4 8.6 Reversal of tax credit valuation allowance.............. -- -- (24.8) State taxes net of FIT benefits......................... 1.5 1.6 2.0 Dividends received credit............................... (1.2) (4.4) (3.8) Nonconventional fuels credit............................ (14.6) (22.4) (14.1) Other, net.............................................. (1.5) 0.8 5.0 ----- ----- ----- Effective tax rate...................................... 38.8% 63.3% 4.7% ===== ===== =====
F-10 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The deferred tax liabilities and assets for the three years ended December 31, 1996 were as follows (in thousands):
1996 1995 1994 ------- ------- ------- Deferred tax liabilities (assets): Intangible drilling and development cost............. $12,998 $ 9,203 $ 7,052 Marketable securities valuation adjustment........... 2,229 6,015 8,241 Deferred pensions and compensation................... (579) (527) (520) Alternative minimum tax credit carryforwards......... (2,318) (2,429) (2,010) Property impairment reserve.......................... (1,767) (277) -- Excess property basis on Wiser Canada................ (4,051) (3,930) (3,978) Valuation allowance.................................. 4,600 4,479 3,978 Other................................................ (137) 165 239 ------- ------- ------- $10,975 $12,699 $13,002 ======= ======= =======
The Company will only realize the benefits of alternative minimum tax credit carryforwards by generating future regular tax liability in excess of alternative minimum tax liability. Prior to 1994, a valuation allowance was provided due to the uncertainty of realizing these tax credits. Due to the Company's sale of a portion of its marketable securities portfolio during 1996, 1995 and 1994, and the Company's plans relating to its remaining marketable securities, the Company believes it is more likely than not that the alternative minimum tax credit carryforwards will be fully utilized. Accordingly, during 1994 the valuation allowance was reversed. As of December 31, 1996, a valuation allowance has been provided against Canadian net deferred tax assets of $4,051,000 and United States deferred tax assets of $549,000. 6. OIL AND GAS PRODUCING ACTIVITIES Set forth below is certain information regarding the aggregate capitalized costs of oil and gas properties and costs incurred in oil and gas property acquisitions, exploration and development activities (in thousands):
U.S. CANADA TOTAL --------- -------- --------- DECEMBER 31, 1996: Capitalization Costs: Proved properties............................. $ 226,411 $ 62,937 $ 289,348 Unproved properties........................... 9,659 7,709 17,368 --------- -------- --------- 236,070 70,646 306,716 Accumulated depreciation, depletion and amortization.................................. (100,016) (29,094) (129,110) --------- -------- --------- Net capitalized costs.......................... $ 136,054 $ 41,552 $ 177,606 ========= ======== ========= Costs Incurred during 1996: Property acquisition.......................... $ 1,782 $ 1,054 $ 2,836 Exploration................................... 875 1,888 2,763 Development................................... 33,994 6,230 40,224 Gas plants.................................... 408 -- 408
F-11 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
U.S. CANADA TOTAL -------- -------- -------- DECEMBER 31, 1995: Capitalization Costs: Proved properties............................... $191,567 $ 56,427 $247,994 Unproved properties............................. 10,110 7,588 17,698 -------- -------- -------- 201,677 64,015 265,692 Accumulated depreciation, depletion and amortization.................................... (81,561) (16,766) (98,327) -------- -------- -------- Net capitalized costs............................ $120,116 $ 47,249 $167,365 ======== ======== ======== Costs Incurred during 1995: Property acquisition............................ $ 3,027 $ 3,210 $ 6,237 Exploration..................................... 2,753 2,270 5,023 Development..................................... 12,477 4,123 16,600 Gas plants...................................... 3,192 -- 3,192 DECEMBER 31, 1994: Capitalization Costs: Proved properties............................... $183,978 $ 47,629 $231,607 Unproved properties............................. 11,427 7,122 18,549 -------- -------- -------- 195,405 54,751 250,156 Accumulated depreciation, depletion and amortization.................................... (80,189) (3,555) (83,744) -------- -------- -------- Net capitalized costs............................ $115,216 $ 51,196 $166,412 ======== ======== ======== Costs Incurred during 1994: Property acquisition............................ $ 2,544 $ 52,988 $ 55,532 Exploration..................................... 2,036 2,057 4,093 Development..................................... 11,059 1,727 12,786 Gas plants...................................... 775 -- 775
7. EMPLOYEE PENSION PLAN The Company has a noncontributory defined benefit pension plan, which covers substantially all full-time employees. Plan participants become fully vested after five years of continuous service. The retirement benefit formula is based on the employee's earnings, length of service and age at retirement. Contributions required to fund plan benefits are determined according to the Projected Unit Credit Method. The assets of the plan are primarily invested in equity and debt securities. The net periodic pension costs were determined as follows (in thousands):
1996 1995 1994 ------- ------- ----- Current service cost................................... $ 381 $ 368 $ 362 Interest cost on projected benefit obligation.......... 824 802 779 Actual return on assets................................ 1,890 (1,575) (37) Net amortization and deferral.......................... (2,652) 932 (648) ------- ------- ----- Net periodic pension cost.............................. $ 443 $ 527 $ 456 ======= ======= =====
F-12 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The principal assumptions for 1996, 1995 and 1994 utilized in computing pension expense include an 8.0% discount rate and a 5.0% rate of increase in compensation levels. The assumed rate of return on plan assets was 9% for 1996 and 8.5% for 1995 and 1994. An amendment to the pension plan, effective January 1, 1993, reduced the normal retirement age from 65 years to 62 years. The following table presents the actuarial valuation of the plan's funded status, as of December 31 (in thousands):
1996 1995 1994 ------ ------- ------- Actuarial present value of pension benefits obliga- tions: Vested............................................. $8,155 $ 9,817 $ 9,369 Nonvested.......................................... 415 354 172 ------ ------- ------- Accumulated........................................ 8,570 10,171 9,541 Projected salary increases......................... 751 705 1,069 ------ ------- ------- Projected benefits obligations..................... 9,321 10,876 10,610 Plan assets at fair value.......................... 8,010 10,247 9,315 ------ ------- ------- Plan assets less than projected benefits obligations....................................... $1,311 $ 629 $ 1,295 ====== ======= ======= Items not yet recognized: Unrecognized net gain.............................. $ 473 $ 1,169 $ 490 Unamortized transition amount...................... 121 208 241 Unamortized prior service cost..................... (957) (1,106) (1,254) ------ ------- ------- Net pension liability.............................. $ 948 $ 900 $ 772 ====== ======= =======
8. EMPLOYEE SAVINGS PLAN The Company has a qualified Savings Plan available to all employees. An employee may elect to have up to 15% of the employee's base monthly compensation, exclusive of other forms of special or extra compensation, withheld and placed in the Savings Plan account. On a monthly basis, the Company contributes to this account an amount equal to 50% of the employee's contribution, limited to 3% of the employee's base compensation. Company contributions to the Savings Plan were $126,000, $122,000 and $116,000, in 1996, 1995 and 1994, respectively. F-13 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 9. BUSINESS SEGMENT INFORMATION The Company operates in one industry segment, the exploration for and production of reserves of oil and gas, with sales made to domestic and Canadian energy customers. The following table summarizes the activity of the Company by geographic area for 1996, 1995 and 1994.
U.S. CANADA TOTAL -------- -------- -------- YEAR ENDED DECEMBER 31, 1996: Total revenues..................................... $ 69,595 $ 17,094 $ 86,689 Cost and expenses: Production and operating.......................... 20,288 3,682 23,970 Purchased natural gas............................. 1,462 -- 1,462 Exploration....................................... 1,837 2,339 4,176 Depreciation, depletion and amortization.......... 11,783 7,870 19,653 Property impairments.............................. 7,276 4,836 12,112 Other operating .................................. 9,475 5,341 14,816 -------- -------- -------- 52,121 24,068 76,189 -------- -------- -------- Pretax income (loss)............................... 17,474 (6,974) 10,500 Income tax expense................................. 4,072 -- 4,072 -------- -------- -------- Results of operations.............................. $ 13,402 $ (6,974) $ 6,428 ======== ======== ======== Identifiable assets................................ $161,687 $ 46,930 $208,617 ======== ======== ======== YEAR ENDED DECEMBER 31, 1995: Total revenues..................................... $ 57,839 $ 13,842 $ 71,681 Cost and expenses: Production and operating.......................... 17,555 3,135 20,690 Purchased natural gas............................. 727 -- 727 Abandonments...................................... 4,173 1,628 5,801 Exploration....................................... 11,418 8,360 19,778 Depreciation, depletion and amortization.......... -- 4,893 4,893 Other operating................................... 8,250 5,561 13,811 -------- -------- -------- 42,123 23,577 65,700 -------- -------- -------- Pretax income (loss)............................... 15,716 (9,735) 5,981 Income tax expense................................. 3,788 -- 3,788 -------- -------- -------- Results of operations.............................. $ 11,928 $ (9,735) $ 2,193 ======== ======== ======== Identifiable assets................................ $152,710 $50,034 $202,744 ======== ======== ========
F-14 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
U.S. CANADA TOTAL -------- ------- -------- YEAR ENDED DECEMBER 31, 1994: Total revenues...................................... $ 58,586 $ 6,770 $ 65,356 Cost and expenses: Production and operating........................... 20,598 1,715 22,313 Purchased natural gas.............................. 759 -- 759 Exploration........................................ 2,757 1,373 4,130 Depreciation, depletion and amortization........... 14,737 3,576 18,313 Other operating ................................... 7,921 2,488 10,409 -------- ------- -------- 46,772 9,152 55,924 -------- ------- -------- Pretax income (loss)................................ 11,814 (2,382) 9,432 Income tax expense.................................. 444 -- 444 -------- ------- -------- Results of operations............................... $ 11,370 $(2,382) $ 8,988 ======== ======= ======== Identifiable assets................................. $157,498 $54,075 $211,573 ======== ======= ========
Annually, four or five of the Company's purchasers of oil and gas individually account for 10% to 35% of gross revenues. In Canada, one purchaser accounts for approximately 75% of Wiser Canada's sales. However, due to the nature of the oil and gas industry, the Company is not dependent upon any of these purchasers. The loss of any major purchaser would not have a material adverse impact on the Company's business. 10. STOCK OPTION PLANS SFAS No. 123, "Accounting for Stock-Based Compensation," encourages but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. During 1996, the Company adopted the disclosure provisions of SFAS No. 123. The Company continues to apply the accounting provisions of APB Opinion 25, "Accounting for Stock Issued to Employees," and related interpretations to account for stock-based compensation. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount an employee must pay to acquire the stock. The Company has two stock option plans, the 1991 Stock Incentive Plan ("1991 Incentive Plan") and the 1991 Non-Employee Directors' Stock Option Plan ("1991 Directors' Plan"). The 1991 Incentive Plan provides for the issuance of ten year options with a variable vesting period and a grant price equal to fair market value. The 1991 Directors' Plan provides for the issuance of five year options with a six month vesting period and a grant price equal to or above market value. F-15 THE WISER OIL COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) A summary of the status of the Company's two stock option plans at December 31, 1996, 1995 and 1994 and changes during the years then ended follows:
1996 1995 1994 ------------------ ------------------ ---------------- EXERCISE EXERCISE EXERCISE SHARES PRICE(1) SHARES PRICE(1) SHARES PRICE(1) -------- -------- -------- -------- ------- -------- Outstanding at beginning of year................ 254,500 $16.88 253,500 $17.20 95,750 $15.95 Granted................. 647,250 14.35 16,000 13.81 157,750 17.36 Exercised............... -- -- -- -- -- -- Expired and cancelled... (22,250) 16.88 (15,000) 17.36 -- -- -------- ------ -------- ------ ------- ------ Outstanding at end of year................... 879,500 $15.02 254,500 $16.88 253,500 $17.20 ======== ====== ======== ====== ======= ====== Exercisable at end of year................... 145,650 $16.47 56,725 $16.59 60,000 $16.70 ======== ====== ======== ====== ======= ====== Fair value of options granted(1)............. $ 4.30 $ 4.08 ======== ========
- -------- (1) Weighted average per option granted. 657,500 of the 879,500 options outstanding at December 31, 1996 have exercise prices between $11 and $15, with a weighted average exercise price of $14.35 and a weighted average remaining contractual life of 9.6 years. 14,500 of these options are currently exercisable with a weighted average exercise price of $13.70. The remaining 222,000 options have exercise prices between $15 and $19, with a weighted average exercise price of $17.02 and a weighted average contractual life of 6.6 years. 131,150 of these options are currently exercisable with a weighted average exercise price of $16.78. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 1996 and 1995 for both the 1991 Incentive Plan and the 1991 Directors' Plan:
1996 1995 ----- ----- Risk free interest rate.................................... 6.36% 6.01% Expected dividend yields................................... .84% .87% Expected lives, in years................................... 4.85 5.00 Expected volatility........................................ 22.22% 22.05%
Had compensation cost been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the following pro forma amounts:
1996 1995 ------ ------ Net income--as reported (in thousands).................... $6,428 $2,193 Net income--pro forma (in thousands)...................... 5,576 2,179 Earnings per share--as reported........................... $ .72 $ .25 Earnings per share--pro forma............................. .62 .24
Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 1, 1995, the resulting pro forma compensation cost may not be representative of that to be expected in future years. 11. PREFERRED STOCK In addition to Common Stock, the Company is authorized to issue 300,000 shares of Preferred Stock with a par value of $10 per share, none of which has been issued. F-16 THE WISER OIL COMPANY SUPPLEMENTAL FINANCIAL INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (UNAUDITED) The following pages include unaudited supplemental financial information as currently required by the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board. 12. OIL AND GAS RESERVES ESTIMATED QUANTITIES OF OIL AND GAS RESERVES (UNAUDITED) Proved reserves are the estimated quantities of crude oil, natural gas and natural gas liquids, which upon analysis of geological and engineering data appear with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved developed reserves are proved reserves which can be expected to be recovered through existing wells with existing equipment and under existing operating conditions. The estimation of reserves requires substantial judgment on the part of petroleum engineers and may result in imprecise determinations, particularly with respect to new discoveries. Accordingly, it is expected that the estimates of reserves will change as future production and development information becomes available and that revisions in these estimates could be significant. F-17 Following is a reconciliation of the Company's estimated net quantities of proved oil and gas reserves, as estimated by independent petroleum consultants.
OIL (MBBLS) GAS (MMCF) ---------------------- ------------------------ U.S. CANADA TOTAL U.S. CANADA TOTAL ------ ------ ------ ------- ------ ------- Balance December 31, 1993..... 21,242 -- 21,242 103,317 -- 103,317 Revisions of previous estimates.................. 1,801 -- 1,801 (2,205) -- (2,205) Properties sold and abandoned.................. (1,513) -- (1,513) (7,031) -- (7,031) Reserves purchased in place...................... 97 3,666 3,763 314 21,395 21,709 Extensions, discoveries and other additions............ 343 71 414 1,488 1,249 2,737 Production.................. (1,957) (320) (2,277) (9,335) (1,272) (10,607) ------ ----- ------ ------- ------ ------- Balance December 31, 1994..... 20,013 3,417 23,430 86,548 21,372 107,920 Revisions of previous estimates.................. 4,322 563 4,885 4,912 (1,140) 3,772 Properties sold and abandoned.................. (187) -- (187) (333) -- (333) Reserves purchased in place...................... 5,825 307 6,132 695 1,132 1,827 Extensions, discoveries and other additions............ 124 157 281 2,046 6,354 8,400 Production.................. (1,657) (676) (2,333) (8,918) (2,753) (11,671) ------ ----- ------ ------- ------ ------- Balance December 31, 1995..... 28,440 3,768 32,208 84,950 24,965 109,915 Revisions of previous estimates.................. (301) (25) (326) 2,738 (535) 2,203 Properties sold and abandoned.................. (78) -- (78) (72) -- (72) Reserves purchased in place...................... 12 -- 12 17 505 522 Extensions, discoveries and other additions............ 2,040 533 2,573 10,787 1,705 12,492 Production.................. (2,033) (744) (2,777) (8,874) (2,809) (11,683) ------ ----- ------ ------- ------ ------- Balance December 31, 1996..... 28,080 3,532 31,612 89,546 23,831 113,377 ====== ===== ====== ======= ====== ======= Proved Developed Reserves: Balance, December 31, 1993.. 17,112 -- 17,112 96,069 -- 96,069 Balance, December 31, 1994 (1)........................ 15,950 3,209 19,159 84,715 13,655 98,370 Balance, December 31, 1995 (1)........................ 17,939 3,617 21,556 77,915 24,111 102,026 Balance, December 31, 1996 (1)........................ 24,892 3,225 28,117 80,652 22,477 103,129
- -------- (1) Canadian reserve volumes as assigned by third party engineers have been increased to reflect the effect of the Alberta Royalty Tax Credit refund. Total proved and proved developed reserves were increased by 364 MBbl and 2,323 MMcf for 1994, 397 MBbl and 2,744 MMcf for 1995 and 186 MBbl and 1,258 MMcf for 1996. STANDARDIZED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS OF PROVED OIL AND GAS RESERVES (UNAUDITED) The Company has estimated the standardized measure of discounted future net cash flows and changes therein relating to proved oil and gas reserves in accordance with the standards established by SFAS No. 69, "Disclosure About Oil and Gas Producing Activities". The estimates of future cash inflows and future production and development costs are based on current year end sales prices for oil and gas, estimated future production of proved reserves and estimated future production and development costs of proved reserves based on current costs and economic conditions. This standardized measure of discounted future net cash flows is an attempt by the Financial Accounting Standards Board to provide the users of financial statements with information regarding future net cash flows from proved reserves. However, the users of these financial statements should F-18 use extreme caution in evaluating this information. The assumptions required to be used in these computations are subjective and arbitrary. Had other equally valid assumptions been used, significantly different results of discounted future net cash flows would result. Therefore, these estimates do not necessarily reflect the current value of the Company's proved reserves or the current value of discounted future net cash flows for the proved reserves. The following are the Company's estimated standardized measure of discounted future net cash flows from proved reserves (in thousands):
U.S. CANADA TOTAL ---------- -------- ---------- December 31, 1996: Future cash flows........................... $1,029,971 $116,203 $1,146,174 Future production and development costs..... (415,276) (25,175) (440,451) Future income tax expense................... (172,024) -- (172,024) ---------- -------- ---------- Future net cash flows....................... 442,671 91,028 533,699 10% Annual discount for estimated timing of cash flows................................. (187,332) (29,187) (216,519) ---------- -------- ---------- Standardized measure of discounted future net cash flows............................. $ 255,339 $ 61,841 $ 317,180 ========== ======== ========== December 31, 1995: Future cash flows........................... $ 679,754 $ 90,978 $ 770,732 Future production and development costs..... (343,867) (25,828) (369,695) Future income tax expense................... (74,433) -- (74,433) ---------- -------- ---------- Future net cash flows....................... 261,454 65,150 326,604 10% Annual discount for estimated timing of cash flows................................. (111,193) (20,809) (132,002) ---------- -------- ---------- Standardized measure of discounted future net cash flows............................. $ 150,261 $ 44,341 $ 194,602 ========== ======== ========== December 31, 1994: Future cash flows........................... $ 449,797 $ 79,208 $ 529,005 Future production and development costs..... (234,189) (22,040) (256,229) Future income tax expense................... (34,690) -- (34,690) ---------- -------- ---------- Future net cash flows....................... 180,918 57,168 238,086 10% Annual discount for estimated timing of cash flows................................. (77,178) (18,876) (96,054) ---------- -------- ---------- Standardized measure of discounted future net cash flows............................. $ 103,740 $ 38,292 $ 142,032 ========== ======== ========== The following are the sources of changes in the standardized measure of discounted net cash flows (in thousands): 1996 1995 1994 ---------- -------- ---------- Standardized measure, beginning of year...... $ 194,602 $142,032 $ 112,423 Sales, net of production costs............... (46,580) (32,907) (29,949) Net change in price and production cost...... 142,806 19,536 6,471 Reserves purchased in place.................. 581 26,087 46,169 Extensions, discoveries and improved recoveries.................................. 42,582 9,297 4,543 Change in future development cost............ 27,080 12,652 (14,265) Revision of previous quantity estimates and disposals................................... 314 26,525 5,080 Sales of reserves in place................... (987) (798) (9,562) Accretion of discount........................ 23,542 16,081 13,715 Changes in timing and other.................. (10,440) (1,863) 1,455 Net change in income taxes................... (56,320) (22,040) 5,952 ---------- -------- ---------- Standardized measure, end of year............ $ 317,180 $194,602 $ 142,032 ========== ======== ==========
F-19 13. QUARTERLY FINANCIAL DATA The supplementary financial data in the table below for each quarterly period within the years ended December 31, 1996 and 1995 are derived from the unaudited consolidated financial statements of the Company.
NET INCOME EARNINGS REVENUES (LOSS) (LOSS) PER SHARE --------------- --------------- --------------------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996: First................... $18,567 $ 1,511 $ .17 Second(1)............... 21,363 (5,368) (.60) Third................... 19,468 2,444 .27 Fourth.................. 27,291 7,841 .88 1995: First................... $16,247 $ 1,238 $ .14 Second.................. 14,583 (720) (.08) Third................... 18,265 1,854 .21 Fourth(2)............... 22,586 (179) (.02)
- -------- (1) During the second quarter of 1996, the Company recognized an impairment write-down of oil and gas properties of $12,112,000 before income taxes. (2) During the fourth quarter of 1995, the Company recognized an impairment write-down of oil and gas properties of $4,893,000 before income taxes. 14. SUMMARY OF GUARANTIES OF 9 1/2% SENIOR SUBORDINATED NOTES In May 1997, the Company issued $125 million aggregate principal amount of its 9 1/2% Senior Subordinated Notes due 2007 pursuant to an offering exempt from registration under the Securities Act of 1933. The notes are unsecured obligations of the Company, subordinated in right of payment to all existing and any future senior indebtedness of the Company. The notes rank pari passu with any future senior subordinated indebtedness and senior to any future junior subordinated indebtedness of the Company. The notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured, senior subordinated basis by certain wholly owned subsidiaries of the Company (the "Subsidiary Guarantors"). At the time of the initial issuance of the notes, Wiser Oil Delaware, Inc., The Wiser Marketing Company, Wiser Delaware LLC, T.W.O.C., Inc. and The Wiser Oil Company of Canada were the Subsidiary Guarantors (the "Initial Subsidiary Guarantors"). Except for two wholly owned subsidiaries that are inconsequential to the Company on a consolidated basis, the Initial Subsidiary Guarantors comprise all of the Company's direct and indirect subsidiaries. Sections 13 and 15(d) of the Securities Exchange Act of 1934 require presentation of the following unaudited summarized financial information of the Subsidiary Guarantors. The Company has not presented separate financial statements and other disclosures concerning each Subsidiary Guarantor because such information is not material to investors. There are no significant contractual restrictions on distributions from each of the Subsidiary Guarantors to the Company. F-20 SUMMARIZED COMBINED FINANCIAL INFORMATION (UNAUDITED)
SUBSIDIARY GUARANTORS -------------------------------------- THE WISER WISER T.W.O.C. MARKETING COMBINED CANADA (1) INC. COMPANY TOTAL ---------- -------- --------- -------- (IN THOUSANDS) REVENUES For the Quarter Ended March 31, 1997.... $ 4,081 $ 2,603 $ 676 $ 7,360 For the Year Ended December 31, 1996.... 17,095 16,304 2,237 35,636 For the Year Ended December 31, 1995.... 13,842 15,884 1,217 30,943 For the Year Ended December 31, 1994.... 6,770 10,149 1,118 18,037 INCOME (LOSS) BEFORE INCOME TAXES For the Quarter Ended March 31, 1997.... $ (907) $ 2,599 $ 67 $ 1,759 For the Year Ended December 31, 1996.... (6,973) 16,287 338 9,652 For the Year Ended December 31, 1995.... (9,736) 15,867 131 6,262 For the Year Ended December 31, 1994.... (2,382) 10,132 139 7,889 NET INCOME (LOSS) For the Quarter Ended March 31, 1997.... $ (677) $ 1,939 $ 50 $ 1,312 For the Year Ended December 31, 1996.... (6,973) 12,492 259 5,778 For the Year Ended December 31, 1995.... (9,736) 12,043 99 2,406 For the Year Ended December 31, 1994.... (2,382) 9,751 134 7,503 CURRENT ASSETS March 31, 1997.......................... $ 5,885 $ 96 $ 283 $ 6,264 December 31, 1996....................... 4,958 53 170 5,181 December 31, 1995....................... 3,039 27 94 3,160 TOTAL ASSETS March 31, 1997.......................... $ 48,266 $ 5,844 $ 532 $ 54,642 December 31, 1996....................... 39,132 7,229 718 47,079 December 31, 1995....................... 43,763 19,619 332 63,714 CURRENT LIABILITIES March 31, 1997.......................... $ 5,866 $ -- $ 254 $ 6,120 December 31, 1996....................... 4,931 -- 508 5,439 December 31, 1995....................... 2,779 -- 200 2,979 NONCURRENT LIABILITIES March 31, 1997.......................... $ 52,436 $ 1,781 $ -- $ 54,217 December 31, 1996....................... 52,439 2,227 -- 54,666 December 31, 1995....................... 52,380 6,007 -- 58,387 STOCKHOLDER'S EQUITY (DEFICIT) March 31, 1997.......................... $(10,036) $ 4,063 $ 278 $ (5,695) December 31, 1996....................... (18,238) 5,002 210 (13,026) December 31, 1995....................... (11,396) 13,612 132 2,348
- -------- (1) Includes the accounts of Wiser Oil Delaware, Inc., Wiser Delaware LLC and The Wiser Oil Company of Canada. F-21 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN- FORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AU- THORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE CON- SUMMATION OF THE EXCHANGE OFFER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IM- PLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAK- ING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. --------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary........................................................ 5 Risk Factors.............................................................. 17 Disclosure Regarding Forward-Looking Statements........................... 26 The Exchange Offer........................................................ 27 Use of Proceeds........................................................... 37 Capitalization............................................................ 38 Selected Consolidated Financial and Operating Data........................ 39 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 42 Business and Properties................................................... 51 Management................................................................ 75 Description of Certain Senior Indebtedness................................ 78 Description of the Exchange Notes......................................... 80 Description of the Outstanding Notes...................................... 116 Certain Federal Income Tax Considerations................................. 117 Plan of Distribution...................................................... 122 Legal Matters............................................................. 124 Experts................................................................... 124 Available Information..................................................... 125 Incorporation of Certain Documents by Reference........................... 126 Glossary of Oil and Gas Terms............................................. 127 Index to Consolidated Financial Statements................................ F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $125,000,000 EXCHANGE OFFER [LOGO OF WISER OIL COMPANY APPEARS HERE] THE WISER OIL COMPANY 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 --------------- PROSPECTUS --------------- DATED , 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. In accordance with Section 102(b)(7) of the Delaware General Corporation Law ("DGCL"), the Company's Certificate of Incorporation includes a provision that eliminates, to the fullest extent permitted by law, the personal liability of members of its Board of Directors to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director. Such provision does not eliminate or limit the liability of a director (1) for any breach of a director's duty of loyalty to the Company or its stockholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of a law, (3) for paying an unlawful dividend or approving an illegal stock purchase or redemption (as provided in Section 174 of the DGCL) or (4) for any transaction from which the director derived an improper personal benefit. Section 145 of the DGCL permits a corporation to indemnify any director or officer of the corporation against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with any action, suit or proceeding brought by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe his conduct was unlawful. In a derivative action (i.e., one brought by or in the right of the corporation), indemnification may be made for expenses actually and reasonably incurred by any officer or director in connection with the defense or settlement of such an action or suit if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine that such person is fairly and reasonably entitled to indemnity for such expenses despite such adjudication of liability. The DGCL also permits a corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer against any liability asserted against him and incurred by him in such capacity, or arising out of his status as such, whether or not the corporation has the power to indemnify him against that liability under Section 145 of the DGCL. Article THIRTEENTH of the Company's Certificate of Incorporation and Section 8.4 of its Bylaws, as amended, generally provide for the indemnification of and advancement of litigation expenses to the Company's directors and officers and such other persons designated by the Board of Directors of the Company as entitled to the benefits of indemnification against all liabilities, losses and expenses incurred in connection with any claim, action, suit or proceeding in which any of them become involved by reason of their service rendered to the Company or, at its request, to another entity; provided, however, that no such right to indemnification shall exist with respect to an action brought by an indemnitee against the Company unless certain conditions set forth in such provisions are satisfied. The provisions of the Company's Certificate of Incorporation and Bylaws are not exclusive of any other indemnification rights to which an indemnitee may be entitled, whether by contract or otherwise. The Company may also purchase liability insurance on behalf of its directors and officers, whether or not it would have the obligation or power to indemnify any of them under the terms of its Certificate of Incorporation. II-1 ITEM 21(A). EXHIBITS. The information required by this Item 21(a) is set forth in the Index to Exhibits accompanying this Registration Statement and is incorporated herein by reference. ITEM 22. UNDERTAKINGS. The undersigned Co-Registrants hereby undertake that, for purposes of determining any liability under the Securities Act, each filing of an annual report pursuant to section 13(a) or section 15(d) of the Exchange Act that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Co- Registrants pursuant to the provisions described under Item 20 above, or otherwise, the Co-Registrants have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by the Co-Registrants of expenses incurred or paid by a director, officer or controlling person of the Co- Registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Co-Registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Co-Registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in the documents filed subsequent to the effective date of the Registration Statement when it became effective. The undersigned Co-Registrants undertake to supply by means of a post- effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-2 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, EACH OF THE CO- REGISTRANTS HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DALLAS AND STATE OF TEXAS ON THE 13TH DAY OF JUNE, 1997. The Wiser Oil Company /s/ Andrew J. Shoup, Jr. By:__________________________________ ANDREW J. SHOUP, JR. PRESIDENT AND CHIEF EXECUTIVE OFFICER Wiser Oil Delaware, Inc. /s/ Andrew J. Shoup, Jr. By:__________________________________ ANDREW J. SHOUP, JR. PRESIDENT AND CHIEF EXECUTIVE OFFICER Wiser Delaware LLC /s/ Andrew J. Shoup, Jr. By:__________________________________ ANDREW J. SHOUP, JR. PRESIDENT AND CHIEF EXECUTIVE OFFICER The Wiser Marketing Company /s/ Andrew J. Shoup, Jr. By:__________________________________ ANDREW J. SHOUP, JR. CHAIRMAN OF THE BOARD The Wiser Oil Company of Canada /s/ Andrew J. Shoup, Jr. By:__________________________________ ANDREW J. SHOUP, JR. CHAIRMAN OF THE BOARD T.W.O.C., Inc. /s/ Andrew J. Shoup, Jr. By:__________________________________ ANDREW J. SHOUP, JR. CHAIRMAN OF THE BOARD AND PRESIDENT II-3 THE WISER OIL COMPANY POWER OF ATTORNEY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. THE UNDERSIGNED PERSONS HEREBY CONSTITUTE AND APPOINT ANDREW J. SHOUP, JR. AND LAWRENCE J. FINN, OR EITHER OF THEM, AS THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT WITH FULL POWER TO EXECUTE IN THEIR NAME AND ON THEIR BEHALF IN THE CAPACITIES INDICATED BELOW ANY AND ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM OR THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. SIGNATURE TITLE DATE --------- ----- ---- /s/ Andrew J. Shoup, Jr. President, Chief June 13, 1997 - ------------------------------------- Executive Officer ANDREW J. SHOUP, JR. and Director (principal executive officer) /s/ Paul D. Neuenschwander Director June 13, 1997 - ------------------------------------- PAUL D. NEUENSCHWANDER /s/ C. Frayer Kimball, III Director June 13, 1997 - ------------------------------------- C. FRAYER KIMBALL, III /s/ Howard G. Hamilton Director June 13, 1997 - ------------------------------------- HOWARD G. HAMILTON /s/ A.W. Schenck, III Director June 13, 1997 - ------------------------------------- A.W. SCHENCK, III /s/ John W. Cushing, III Director June 13, 1997 - ------------------------------------- JOHN W. CUSHING, III /s/ Lorne H. Larson Director June 13, 1997 - ------------------------------------- LORNE H. LARSON /s/ Jon L. Mosle, Jr. Director June 13, 1997 - ------------------------------------- JON L. MOSLE, JR. /s/ Lawrence J. Finn Vice President June 13, 1997 - ------------------------------------- Finance and Chief LAWRENCE J. FINN Financial Officer (principal financial and accounting officer) II-4 WISER OIL DELAWARE, INC. POWER OF ATTORNEY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. THE UNDERSIGNED PERSONS HEREBY CONSTITUTE AND APPOINT ANDREW J. SHOUP, JR. AND LAWRENCE J. FINN, OR EITHER OF THEM, AS THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT WITH FULL POWER TO EXECUTE IN THEIR NAME AND ON THEIR BEHALF IN THE CAPACITIES INDICATED BELOW ANY AND ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM OR THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. SIGNATURE TITLE DATE --------- ----- ---- /s/ Andrew J. Shoup, Jr. President, Chief June 13, 1997 - ------------------------------------ Executive Officer ANDREW J. SHOUP, JR. and Director (principal executive officer) /s/ A. Wayne Ritter Vice President and June 13, 1997 - ------------------------------------ Director A. WAYNE RITTER /s/ Lawrence J. Finn Vice President, June 13, 1997 - ------------------------------------ Treasurer and LAWRENCE J. FINN Director (principal financial and accounting officer) II-5 WISER DELAWARE LLC POWER OF ATTORNEY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. THE UNDERSIGNED PERSONS HEREBY CONSTITUTE AND APPOINT ANDREW J. SHOUP, JR. AND LAWRENCE J. FINN, OR EITHER OF THEM, AS THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT WITH FULL POWER TO EXECUTE IN THEIR NAME AND ON THEIR BEHALF IN THE CAPACITIES INDICATED BELOW ANY AND ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM OR THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. SIGNATURE TITLE DATE --------- ----- ---- /s/ Andrew J. Shoup, Jr. President and Chief June 13, 1997 - ------------------------------------- Executive Officer ANDREW J. SHOUP, JR. (principal executive officer) The Wiser Oil Company Member June 13, 1997 By: /s/ Andrew J. Shoup, Jr. ----------------------------------- ANDREW J. SHOUP, JR. President and Chief Executive Officer Wiser Oil Delaware, Inc. Member June 13, 1997 By: /s/ Andrew J. Shoup, Jr. ----------------------------------- ANDREW J. SHOUP, JR. President and Chief Executive Officer /s/ Lawrence J. Finn Vice President and June 13, 1997 - ------------------------------------- Treasurer LAWRENCE J. FINN (principal financial and accounting officer) II-6 THE WISER MARKETING COMPANY POWER OF ATTORNEY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. THE UNDERSIGNED PERSONS HEREBY CONSTITUTE AND APPOINT ANDREW J. SHOUP, JR. AND LAWRENCE J. FINN, OR EITHER OF THEM, AS THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT WITH FULL POWER TO EXECUTE IN THEIR NAME AND ON THEIR BEHALF IN THE CAPACITIES INDICATED BELOW ANY AND ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM OR THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. SIGNATURE TITLE DATE --------- ----- ---- /s/ Andrew J. Shoup, Jr. Chairman of the June 13, 1997 - ------------------------------------- Board and Director ANDREW J. SHOUP, JR. (principal executive officer) /s/ Joe E. Caldwell President (principal June 13, 1997 - ------------------------------------- executive officer) JOE E. CALDWELL /s/ A. Wayne Ritter Director June 13, 1997 - ------------------------------------- A. WAYNE RITTER /s/ Lawrence J. Finn Vice President and June 13, 1997 - ------------------------------------- Director (principal LAWRENCE J. FINN financial and accounting officer) II-7 THE WISER OIL COMPANY OF CANADA POWER OF ATTORNEY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. THE UNDERSIGNED PERSONS HEREBY CONSTITUTE AND APPOINT ANDREW J. SHOUP, JR. AND LAWRENCE J. FINN, OR EITHER OF THEM, AS THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT WITH FULL POWER TO EXECUTE IN THEIR NAME AND ON THEIR BEHALF IN THE CAPACITIES INDICATED BELOW ANY AND ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM OR THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. SIGNATURE TITLE DATE --------- ----- ---- /s/ Andrew J. Shoup, Jr. Chairman of the June 13, 1997 - ------------------------------------- Board and Director ANDREW J. SHOUP, JR. (principal executive officer) /s/ Allan J. Simus President and June 13, 1997 - ------------------------------------- Director (principal ALLAN J. SIMUS executive officer) /s/ Lawrence J. Finn Vice President June 13, 1997 - ------------------------------------- (principal LAWRENCE J. FINN financial and accounting officer) II-8 T.W.O.C., INC. POWER OF ATTORNEY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED. THE UNDERSIGNED PERSONS HEREBY CONSTITUTE AND APPOINT ANDREW J. SHOUP, JR. AND LAWRENCE J. FINN, OR EITHER OF THEM, AS THEIR TRUE AND LAWFUL ATTORNEYS-IN-FACT WITH FULL POWER TO EXECUTE IN THEIR NAME AND ON THEIR BEHALF IN THE CAPACITIES INDICATED BELOW ANY AND ALL AMENDMENTS AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION STATEMENT AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE OR NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM OR THEIR OR HIS SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. SIGNATURE TITLE DATE --------- ----- ---- /s/ Andrew J. Shoup, Jr. Chairman of the June 13, 1997 - ------------------------------------- Board, President ANDREW J. SHOUP, JR. and Director (principal executive officer) /s/ A. Wayne Ritter Vice President and June 13, 1997 - ------------------------------------- Director A. WAYNE RITTER /s/ Peter C. Fulweiler Director June 13, 1997 - ------------------------------------- PETER C. FULWEILER /s/ Henry H. Beckler Director June 13, 1997 - ------------------------------------- HENRY H. BECKLER /s/ Lawrence J. Finn Vice President and June 13, 1997 - ------------------------------------- Director (principal LAWRENCE J. FINN financial and accounting officer) II-9 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT ------- ---------------------- 4.1* Indenture dated May 21, 1997, among the Co-Registrants and Texas Commerce Bank National Association, as Trustee. 4.2* Form of 9 1/2% Senior Subordinated Notes due 2007 (included in the Indenture filed as Exhibit 4.1). 4.3* Registration Agreement dated May 21, 1997, among the Co-Registrants and Salomon Brothers Inc, NationsBanc Capital Markets, Inc. and Nesbitt Burns Securities Inc., as the Initial Purchasers. 4.4 Credit Agreement dated June 23, 1994 among The Wiser Oil Company and The Wiser Oil Company of Canada, as Borrowers, and NationsBank of Texas, N.A. ("NationsBank"), as Agent, and Certain Financial Institutions listed on the Signature Pages Thereto, as Banks, incorporated by reference to Exhibit 10.1 to the report on Form 8-K dated July 11, 1994 as amended August 17, 1994. 4.5* First Amendment to Credit Agreement dated November 29, 1995 among The Wiser Oil Company and The Wiser Oil Company of Canada, as Borrowers, and NationsBank, as Agent, and Certain Financial Institutions Listed on the Signature Pages thereto, as Banks. 4.6* Second Amendment to Credit Agreement dated May 20, 1997 among The Wiser Oil Company and The Wiser Oil Company of Canada, Inc., as Borrowers, and NationsBank as Agent, and Certain Financial Institutions Listed on the Signature Pages thereto, as Banks. 4.7* Guaranty Agreement dated May 20, 1997, by Wiser Oil Delaware, Inc, in favor of NationsBank and PNC Bank, National Association ("PNC"). 4.8* Guaranty Agreement dated May 20, 1997, by Wiser Delaware LLC, in favor of NationsBank and PNC. 4.9* Guaranty Agreement dated May 20, 1997, by The Wiser Marketing Company in favor of NationsBank and PNC. 4.10* Guaranty Agreement dated May 20, 1997, by The Wiser Oil Company of Canada in favor of NationsBank and PNC. 4.11* Guaranty Agreement dated May 20, 1997, by T.W.O.C., Inc. in favor of NationsBank and PNC. 5* Opinion of Thompson & Knight, A Professional Corporation, regarding legality 12* Statement of ratio of earnings to fixed charges, EBITDAX to fixed charges and total debt to EBITDAX for each of the last five fiscal years 23.1* Consent of Thompson & Knight, A Professional Corporation (contained in its opinion filed as Exhibit 5) 23.2* Consent of Arthur Andersen LLP 23.3* Consent of DeGolyer and MacNaughton 23.4* Consent of Gilbert Lausten Jung Associates Ltd. 24* Power of Attorney (powers of attorney pursuant to which amendments to the Registration Statement may be filed are included on the signature pages hereof) 25* Statement of Eligibility of Texas Commerce Bank National Association, as trustee
- -------- * Filed herewith EX-4.1 2 INDENTURE EXHIBIT 4.1 ================================================================================ THE WISER OIL COMPANY AND SUBSIDIARY GUARANTORS $125,000,000 91/2% Senior Subordinated Notes due 2007 ---------------------------- INDENTURE Dated as of May 21, 1997 ---------------------------- TEXAS COMMERCE BANK NATIONAL ASSOCIATION Trustee ================================================================================ TABLE OF CONTENTS ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions................................................. 1 SECTION 1.02. Incorporation by Reference of Trust Indenture Act........... 22 SECTION 1.03. Rules of Construction....................................... 23 ARTICLE 2 The Securities SECTION 2.01. Form and Dating............................................. 24 SECTION 2.02. Execution and Authentication................................ 24 SECTION 2.03. Registrar and Paying Agent.................................. 24 SECTION 2.04. Paying Agent To Hold Money in Trust......................... 25 SECTION 2.05. Holder Lists................................................ 25 SECTION 2.06. Replacement Securities...................................... 25 SECTION 2.07. Outstanding Securities...................................... 25 SECTION 2.08. Temporary Securities........................................ 26 SECTION 2.09. Cancellation................................................ 26 SECTION 2.10. Defaulted Interest.......................................... 26 SECTION 2.11. CUSIP Numbers............................................... 26 ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee.......................................... 27 SECTION 3.02. Selection of Securities To Be Redeemed...................... 27 SECTION 3.03. Notice of Redemption........................................ 27 SECTION 3.04. Effect of Notice of Redemption.............................. 28 SECTION 3.05. Deposit of Redemption Price................................. 28 SECTION 3.06. Securities Redeemed in Part................................. 28 ARTICLE 4 Covenants SECTION 4.01. Payment of Securities....................................... 28 SECTION 4.02. Commission Reports.......................................... 29 SECTION 4.03. Limitation on Indebtedness.................................. 29 SECTION 4.04. Limitation on Restricted Payments........................... 30 SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries............................ 32 SECTION 4.06. Limitation on Asset Sales................................... 33 SECTION 4.07. Limitation on Transactions with Affiliates.................. 35 SECTION 4.08. Limitation on Issuance and Sale of Capital Stock of Restricted Subsidiaries.............................. 37 SECTION 4.09. Change of Control........................................... 36 SECTION 4.10. Limitation on Liens......................................... 38 SECTION 4.11. Incurrence of Layered Indebtedness.......................... 38 SECTION 4.12. Restricted and Unrestricted Subsidiaries.................... 38 SECTION 4.13. Future Guarantors........................................... 39 SECTION 4.14. Maintenance of Office or Agency............................. 39 SECTION 4.15. Money for the Security Payments to be Held in Trust......... 40 SECTION 4.16. Payment of Taxes and Other Claims........................... 40 SECTION 4.17. Corporate Existence......................................... 40 SECTION 4.18. Compliance Certificate...................................... 41 SECTION 4.19. Further Instruments and Acts................................ 41 SECTION 4.20. Prohibition on Company and Guarantors Becoming Investment Companies.................................... 41 SECTION 4.21. Stay, Extension and Usury Laws.............................. 41 ARTICLE 5 Successor Company SECTION 5.01. Merger, Consolidation and Sale of Substantially All Assets.............................................. 41 SECTION 5.02. When a Subsidiary Guarantor May Merge or Transfer Assets.................................................. 42 ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default........................................... 43 SECTION 6.02. Acceleration................................................ 44 SECTION 6.03. Other Remedies.............................................. 45 SECTION 6.04. Waiver of Past Defaults..................................... 45 SECTION 6.05. Control by Majority......................................... 46 SECTION 6.06. Limitation on Suits......................................... 46 SECTION 6.07. Rights of Holders to Receive Payment........................ 46 SECTION 6.08. Collection Suit by Trustee.................................. 46 SECTION 6.09. Trustee May File Proofs of Claim............................ 46 SECTION 6.10. Priorities.................................................. 47 SECTION 6.11. Undertaking for Costs....................................... 47 ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee........................................... 47 SECTION 7.02. Rights of Trustee........................................... 48 SECTION 7.03. Individual Rights of Trustee................................ 50 SECTION 7.04. Trustee's Disclaimer........................................ 50 SECTION 7.05. Notice of Defaults.......................................... 50 SECTION 7.06. Reports by Trustee to Holders............................... 50 SECTION 7.07. Compensation and Indemnity.................................. 50 SECTION 7.08. Replacement of Trustee...................................... 51 SECTION 7.09. Successor Trustee by Merger................................. 52 SECTION 7.10. Eligibility; Disqualification............................... 52 SECTION 7.11. Preferential Collection of Claims Against Company......................................... 52 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities........................ 52 SECTION 8.02. Defeasance.................................................. 53 SECTION 8.03. Conditions to Defeasance.................................... 54 SECTION 8.04. Application of Trust Money.................................. 54 SECTION 8.05. Repayment to Company........................................ 55 SECTION 8.06. Indemnity for Government Obligations........................ 55 SECTION 8.07. Reinstatement............................................... 55 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders.................................. 55 SECTION 9.02. With Consent of Holders..................................... 56 SECTION 9.03. Compliance with Trust Indenture Act......................... 58 SECTION 9.04. Revocation and Effect of Consents and Waivers............... 58 SECTION 9.05. Notation on or Exchange of Securities....................... 58 SECTION 9.06. Trustee To Sign Amendments.................................. 58 SECTION 9.07. Payment for Consent......................................... 58 ARTICLE 10 Subordination of the Securities SECTION 10.01. Agreement to Subordinate.................................... 59 SECTION 10.02. Liquidation; Dissolution; Bankruptcy........................ 59 SECTION 10.03. Default on Senior Indebtedness of the Company............... 60 SECTION 10.04. Acceleration of Payment of Securities....................... 60 SECTION 10.05. When Distribution Must Be Paid Over......................... 61 SECTION 10.06. Subrogation................................................. 61 SECTION 10.07. Relative Rights............................................. 61 SECTION 10.08. Subordination May Not Be Impaired by the Company............ 61 SECTION 10.09. Rights of Trustee and Paying Agent.......................... 61 SECTION 10.10. Distribution of Notice to Representative.................... 62 SECTION 10.11. Trust Moneys Not Subordinated............................... 62 SECTION 10.12. Trustee Entitled To Rely.................................... 62 SECTION 10.13. Trustee To Effectuate Subordination......................... 62 SECTION 10.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Company.......................................... 63 SECTION 10.15. Reliance by Holders of Senior Indebtedness of the Company on Subordination Provisions..................... 63 SECTION 10.16. Proofs of Claim............................................. 63 SECTION 10.17. Rights of Trustee as Holder of Senior Indebtedness of the Company; Preservation of Trustee's Rights........ 63 SECTION 10.18. Article Applicable to Paying Agents......................... 64 ARTICLE 11 Subsidiary Guaranties SECTION 11.01. Guaranties.................................................. 64 SECTION 11.02. Limitation on Liability..................................... 66 SECTION 11.03. Successors and Assigns...................................... 66 SECTION 11.04. No Waiver................................................... 67 SECTION 11.05. Modification................................................ 67 SECTION 11.06. Release of Subsidiary Guarantor............................. 67 SECTION 11.07. Execution of Supplemental Indenture for Future Subsidiary Guarantors................................... 67 ARTICLE 12 Subordination of Subsidiary Guaranties SECTION 12.01. Agreement to Subordinate.................................... 67 SECTION 12.02. Liquidation; Dissolution; Bankruptcy........................ 68 SECTION 12.03. Default Senior Indebtedness of a Subsidiary Guarantor....... 69 SECTION 12.04. Acceleration of Payment of Securities....................... 69 SECTION 12.05. When Guaranty Payment Must Be Paid Over..................... 70 SECTION 12.06. Subrogation................................................. 70 SECTION 12.07. Relative Rights............................................. 70 SECTION 12.08. Subordination May Not be Impaired by the Subsidiary Guarantor............................................... 70 SECTION 12.09. Rights of Trustee and Paying Agent.......................... 70 SECTION 12.10. Distribution of Notice to Representative.................... 71 SECTION 12.11. Trust Moneys Not Subordinated............................... 71 SECTION 12.12. Trustee Entitled To Rely.................................... 71 SECTION 12.13. Trustee To Effectuate Subordination......................... 72 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of the Subsidiary Guarantors............................ 72 SECTION 12.15. Reliance by Holders of Senior Indebtedness of the Subsidiary Guarantors on Subordination Provisions....... 72 SECTION 12.16. Proofs of Claim............................................. 72 SECTION 12.17. Rights of Trustee as Holder of Senior Indebtedness of the Subsidiary Guarantors; Preservation of Trustee's Rights.................................................. 72 SECTION 12.18. Article Applicable to Paying Agents......................... 73 SECTION 12.19. Liquidation, Dissolution and Bankruptcy..................... 73 ARTICLE 13 Miscellaneous SECTION 13.01. Compliance Certificates and Opinions........................ 73 SECTION 13.02. Form of Documents Delivered to Trustee...................... 74 SECTION 13.03. Acts of Holders............................................. 74 SECTION 13.04. Trust Indenture Act Controls................................ 76 SECTION 13.05. Notices..................................................... 76 SECTION 13.06. Communication by Holders with Other Holders................. 77 SECTION 13.07. When Securities Disregarded................................. 76 SECTION 13.08. Rules by Trustee, Paying Agent and Registrar................ 77 SECTION 13.09. Legal Holidays.............................................. 77 SECTION 13.10. Governing Law............................................... 77 SECTION 13.11. No Recourse Against Others.................................. 77 SECTION 13.12. Submission to Jurisdiction; Appointment of Agent for Service of Process; Waiver of Immunities............ 77 SECTION 13.13. Successors.................................................. 79 SECTION 13.14. Multiple Originals.......................................... 79 SECTION 13.15. Table of Contents; Headings................................. 79 Appendix A Provisions Relating to Initial Securities and Exchange Securities Exhibit 1 to Appendix A Form of Initial Security Exhibit A Form of Exchange Security Exhibit B Form of Supplemental Indenture CROSS-REFERENCE TABLE TIA Indenture Section Section ------- ------- 310(a)(1)...................................... 7.10 (a)(2)...................................... 7.10 (a)(3)...................................... N.A. (a)(4)...................................... N.A. (b)......................................... 7.08; 7.10 (c)......................................... N.A. 311(a)......................................... 7.11 (b)......................................... 7.11 (c)......................................... N.A. 312(a)......................................... 2.05 (b)......................................... 13.06 (c)......................................... 13.06 313(a)......................................... 7.06 (b)(1)...................................... N.A. (b)(2)...................................... 7.06 (c)......................................... 13.05 (d)......................................... 7.06 314(a)......................................... 4.02; 4.18; 13.01 (b)......................................... N.A. (c)(1)...................................... 13.01 (c)(2)...................................... 13.01 (c)(3)...................................... N.A. (d)......................................... N.A. (e)......................................... 13.01 315(a)......................................... 7.01 (b)......................................... 7.05 (c)......................................... 7.01 (d)......................................... 7.01 (e)......................................... 6.11 316(a)(last sentence).................................. 13.07 (a)(1)(A)................................... 6.05 (a)(1)(B)................................... 6.04 (a)(2)...................................... N.A. (b)......................................... 6.07 (c)......................................... 13.03 317(a)(1)...................................... 6.08 (a)(2)...................................... 6.09 (b)......................................... 2.04 318(a)......................................... 13.04 N.A. Means Not Applicable. - ------------- Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture. 1 INDENTURE dated as of May 21, 1997, among THE WISER OIL COMPANY, a Delaware corporation (the "Company"), certain of the Company's subsidiaries signatory ------- hereto (each, a "Subsidiary Guarantor" and, collectively, the "Subsidiary -------------------- ---------- Guarantors"), and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as trustee (the - ---------- "Trustee"). - -------- Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's 9 1/2% Senior Subordinated Notes Due 2007 (the "Initial Securities") and, if and when issued ------------------ pursuant to a registered exchange for the Initial Securities, the Company's 9 1/2% Senior Subordinated Notes Due 2007 (the "Exchange Securities" and, together ------------------- with the Initial Securities, the "Securities"): ---------- ARTICLE 1 Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions. ------------ "Acquired Indebtedness" means, with respect to the Company and its --------------------- Restricted Subsidiaries, Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary. "Additional Assets" means (i) any Property (other than cash, Permitted ----------------- Short-Term Investments or securities) used in the Oil and Gas Business or any business ancillary thereto, (ii) Investments in any other Person engaged in the Oil and Gas Business or any business ancillary thereto (including the acquisition from third parties of Capital Stock of such Person) made in compliance with Section 4.04 and as a result of which such other Person becomes a Restricted Subsidiary in compliance with Section 4.12, (iii) the acquisition from third parties of Capital Stock of a Restricted Subsidiary, (iv) the costs of acquiring, exploiting, developing and exploring in respect of oil and gas properties or (v) Permitted Business Investments. "Adjusted Consolidated Net Tangible Assets" means (without duplication), as ----------------------------------------- of the date of determination, the remainder of: (i) the sum of (A) discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries, calculated in accordance with Commission guidelines before any state, federal or foreign income taxes, as estimated by the Company and confirmed by a nationally recognized firm of independent petroleum engineers in a reserve report prepared as of the end of the Company's most recently completed fiscal year for which audited financial statements are available, as increased by, as of the date of determination, the estimated discounted future net revenues from (1) estimated proved oil and gas reserves acquired since such year- end, which reserves were not reflected in such year-end reserve report, and (2) estimated oil and gas reserves attributable to upward revisions of estimates of proved oil and gas reserves since such year-end due to exploration, development or exploitation activities, in each case calculated in accordance with Commission guidelines (utilizing the prices utilized in such year-end reserve report), and decreased by, as of the date of determination, the estimated discounted future net revenues 1 from (3) estimated proved oil and gas reserves produced or disposed of since such year-end and (4) estimated oil and gas reserves attributable to downward revisions of estimates of proved oil and gas reserves since such year-end due to changes in geological conditions or other factors which would, in accordance with standard industry practice, cause such revisions, in each case calculated in accordance with Commission guidelines (utilizing the prices utilized in such year-end reserve report); provided that, in the -------- case of each of the determinations made pursuant to clauses (1) through (4), such increases and decreases shall be as estimated by the Company's petroleum engineers, unless there is a Material Change as a result of such acquisitions, dispositions or revisions, in which event the discounted future net revenues utilized for purposes of this clause (i)(A) shall be confirmed in writing by a nationally recognized firm of independent petroleum engineers, (B) the capitalized costs that are attributable to oil and gas properties of the Company and its Restricted Subsidiaries to which no proved oil and gas reserves are attributable, based on the Company's books and records as of a date no earlier than the date of the Company's latest annual or quarterly financial statements, (C) the Net Working Capital on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (D) the greater of (1) the net book value on a date no earlier than the date of the Company's latest annual or quarterly financial statements and (2) the appraised value, as estimated by independent appraisers, of other tangible assets (including, without duplication, Investments in unconsolidated Restricted Subsidiaries) of the Company and its Restricted Subsidiaries, as of the date no earlier than the date of the Company's latest audited financial statements, minus ----- (ii) the sum of (A) minority interests, (B) any net gas balancing liabilities of the Company and its Restricted Subsidiaries reflected in the Company's latest audited financial statements, (C) to the extent included in (i)(A) above, the discounted future net revenues, calculated in accordance with Commission guidelines (utilizing the prices utilized in the Company's year-end reserve report), attributable to reserves which are required to be delivered to third parties to fully satisfy the obligations of the Company and its Restricted Subsidiaries with respect to Volumetric Production Payments (determined, if applicable, using the schedules specified with respect thereto) and (D) the discounted future net revenues, calculated in accordance with Commission guidelines, attributable to reserves subject to Dollar-Denominated Production Payments which, based on the estimates of production and price assumptions included in determining the discounted future net revenues specified in (i)(A) above, would be necessary to fully satisfy the payment obligations of the Company and its Restricted Subsidiaries with respect to Dollar-Denominated Production Payments (determined, if applicable, using the schedules specified with respect thereto). "Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean the ------------------- amount by which the fair value of the Property of such Subsidiary Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date), but excluding liabilities under the Subsidiary Guaranty, of such Subsidiary Guarantor at such date. "Affiliate" of any specified Person means any other Person (i) which --------- directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person or (ii) which beneficially owns or holds directly or indirectly 10% or more of 2 any class of the Voting Stock of such specified Person or of any Subsidiary of such specified Person. For the purposes of this definition, "control," when used ------- with respect to any specified Person, means the power to direct the management and policies of such Person directly or indirectly, whether through the ownership of Voting Stock, by contract or otherwise; and the terms "controlling" ----------- and "controlled" have meanings correlative to the foregoing. ---------- "Asset Sale" means with respect to any Person, any transfer, conveyance, ---------- sale, lease or other disposition (collectively, "dispositions," and including, without limitation, dispositions pursuant to any consolidation or merger) by such Person or any of its Restricted Subsidiaries in any single transaction or series of transactions of (i) shares of Capital Stock or other ownership interests of another Person (including Capital Stock of Restricted Subsidiaries and Unrestricted Subsidiaries) or (ii) any other Property of such Person or any of Its Restricted Subsidiaries; provided, however, that the term "Asset Sale" -------- ------- shall not include: (A) the disposition of Permitted Short-Term Investments, inventory, accounts receivable or other Property (excluding the disposition of oil and gas in place and other interests in real property unless made in connection with a Permitted Business Investment) in the ordinary course of business; (B) the disposition of Property received in settlement of debts owing to the Company or any Restricted Subsidiary as a result of foreclosure, perfection or enforcement of any Lien or debt, which debts were owing to the Company or any Restricted Subsidiary in the ordinary course of business of the Company or such Restricted Subsidiary; (C) any disposition that constitutes a Restricted Payment made in compliance with Section 4.04; (D) when used with respect to the Company, any disposition of all or substantially all of the Property of the Company permitted pursuant to the provisions of the Indenture described under Section 5.01; (E) the disposition of any Property by the Company or a Restricted Subsidiary to the Company or a Wholly Owned Restricted Subsidiary; (F) the disposition of any asset with a Fair Market Value of less than $1 million; or (G) any Production Payment and Reserve Sale created, incurred, issued, assumed or guaranteed in connection with the financing of, and within 60 days after the acquisition of, the Property that is subject thereto. "Assigned Restricted Subsidiary Indebtedness" means Indebtedness of a ------------------------------------------- Restricted Subsidiary to the Company that the Company has assigned to the lenders under any Senior Credit Facility, as collateral securing Indebtedness of the Company under such Senior Credit Facility. "Average Life" means, with respect to any Indebtedness, as at any date of ------------ determination, the quotient obtained by dividing (i) the sum of the products of (A) the number of years (and any portion thereof) from the date of determination to the date or dates of each successive scheduled principal payment (including, without limitation, any sinking fund or mandatory redemption payment requirements) of such Indebtedness multiplied by (B) the amount of each such principal payment by (ii) the sum of all such principal payments. "Bankruptcy Law" means Title 11, United States Code, or any similar federal -------------- or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company or any ------------------ committee thereof duly authorized to act on behalf of such Board. 3 "Board Resolutions" means a copy of a resolution certified by the Secretary ----------------- or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday ------------ which is not a day on which banking institutions are authorized or obligated by law or executive order to close in New York, New York or Dallas, Texas or, with respect to any payment of cash or delivery of securities, the place of such payment or delivery. "Capital Lease Obligation" means any obligation which is required to be ------------------------ classified and accounted for as a capital lease obligation in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP, and the Stated Maturity thereof shall be the date of the last payment date of rent or any other amount due in respect of such obligation. For purposes of Section 4.10, a Capital Lease Obligation shall be deemed to be secured by a Lien on the Property being leased. "Capital Stock" in any Person means any and all shares, interests, ------------- participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to subscribe for or to acquire an equity interest in such Person; provided, however, that "Capital Stock" shall not -------- ------- include Redeemable Stock. "Change of Control" shall be deemed to occur if (i) any "person" or "group" ----------------- (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing, including any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act) becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of 50% or more of the total voting power of all classes of the Voting Stock of the Company or warrants or options to acquire such Voting Stock, calculated on a fully diluted basis, (ii) the sale, lease, conveyance or transfer of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole (other than to any Wholly Owned Restricted Subsidiary) shall have occurred, (iii) the stockholders of the Company shall have approved any plan of liquidation or dissolution of the Company, (iv) the Company consolidates with or merges into another Person or any Person consolidates with or merges into the Company in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is reclassified into or exchanged for cash, securities or other property, other than any such transaction where (A) the outstanding Voting Stock of the Company is reclassified into or exchanged for Voting Stock of the surviving corporation that is Capital Stock and (B) either (1) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving corporation immediately after such transaction in substantially the same proportion as before the transaction or (2) within 25 days after the closing of any such transaction both Moody's and S&P, shall have expressly affirmed credit ratings for the Securities (after giving effect to such transaction) that are as high or higher than the highest such ratings for the Securities given by such services, respectively, at any time during the 90 days immediately prior to the public announcement of such transaction and such expressly affirmed ratings are at least B1 from Moody's and B+ from S&P or (v) during any period of two consecutive 4 years, individuals who at the beginning of such period constituted the Company's Board of Directors (together with any new directors whose election or appointment by such board or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Company's Board of Directors then in office. "Commission" means the Securities and Exchange Commission, as from time to ---------- time constituted, created under the Exchange Act, or if at any time after the execution of this instrument, such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of ------- this Indenture, until a successor Person shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor Person. "Consolidated Interest Coverage Ratio" means, as of the date of the ------------------------------------ transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the "Transaction Date"), the ratio of (i) the aggregate amount ---------------- of EBITDA of the Company and its consolidated Restricted Subsidiaries for the four full fiscal quarters immediately prior to the Transaction Date for which financial statements are available to (ii) the aggregate Consolidated Interest Expense of the Company and its Restricted Subsidiaries that is anticipated to accrue during a period consisting of the fiscal quarter in which the Transaction Date occurs and the three fiscal quarters immediately subsequent thereto (based upon the pro forma amount and maturity of, and interest payments in respect of, Indebtedness of the Company and its Restricted Subsidiaries expected by the Company to be outstanding on the Transaction Date), assuming for the purposes of this measurement the continuation of market interest rates prevailing on the Transaction Date and base interest rates in respect of floating interest rate obligations equal to the base interest rates on such obligations in effect as of the Transaction Date, provided, that if the Company or any of its Restricted -------- Subsidiaries is a party to any Interest Rate Protection Agreement which would have the effect of changing the interest rate on any Indebtedness of the Company or any of its Restricted Subsidiaries for such four quarter period (or a portion thereof), the resulting rate shall be used for such four quarter period or portion thereof; provided, further, that any Consolidated Interest Expense with -------- ------- respect to Indebtedness Incurred or retired by the Company or any of its Restricted Subsidiaries during the fiscal quarter in which the Transaction Date occurs shall be calculated as if such Indebtedness was so Incurred or retired on the first day of the fiscal quarter in which the Transaction Date occurs. In addition, if since the beginning of the four full fiscal quarter period preceding the Transaction Date, (i) the Company or any of its Restricted Subsidiaries shall have engaged in any Asset Sale, EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive), or increased by an amount equal to the EBITDA (if negative), directly attributable to the assets which are the subject of such Asset Sale for such period calculated on a pro forma basis as if such Asset Sale and any related retirement of Indebtedness had occurred on the first day of such period or (ii) the Company or any of its Restricted Subsidiaries shall have acquired any material assets, EBITDA shall be calculated on a pro forma basis as if such asset acquisitions had occurred on the first day of such four fiscal quarter period. 5 "Consolidated Interest Expense" means, with respect to any Person for any ----------------------------- period, without duplication, (i) the sum of (A) the aggregate amount of cash and noncash interest expense (including capitalized interest) of such Person and its Restricted Subsidiaries for such period as determined on a consolidated basis in accordance with GAAP in respect of Indebtedness (including, without limitation, (1) any amortization of debt discount, (2) net costs associated with Interest Rate Protection Agreements (including any amortization of discounts), (3) the interest portion of any deferred payment obligation, (4) all accrued interest, and (5) all commissions, discounts, commitment fees, origination fees and other fees and charges owed with respect to the Senior Credit Facilities and other Indebtedness) paid, accrued or scheduled to be paid or accrued during such period; (B) Redeemable Stock dividends of such Person (and of its Restricted Subsidiaries if paid to a Person other than such Person or its Restricted Subsidiaries) declared and payable other than in kind; (C) the portion of any rental obligation of such Person or its Restricted Subsidiaries in respect of any Capital Lease Obligation allocable to interest expense in accordance with GAAP; (D) the portion of any rental obligation of such Person or its Restricted Subsidiaries in respect of any Sale and Leaseback Transaction that is Indebtedness allocable to interest expense (determined as if such obligation were treated as a Capital Lease Obligation); and (E) to the extent any Indebtedness of any other Person (other than Restricted Subsidiaries) is Guaranteed by such Person or any of its Restricted Subsidiaries, the aggregate amount of interest paid, accrued or scheduled to be paid or accrued by such other Person during such period attributable to any such Indebtedness; less (ii) to the extent included in (i) above, amortization or write-off of deferred financing costs of such Person and its Restricted Subsidiaries during such period; in the case of both (i) and (ii) above, after elimination of intercompany accounts among such Person and its Restricted Subsidiaries and as determined in accordance with GAAP. "Consolidated Net Income" of any Person means, for any period, the ----------------------- aggregate net income (or net loss, as the case may be) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom, without -------- duplication, (i) items classified as extraordinary gains or losses net of tax (less all fees and expenses relating thereto); (ii) any gain or loss, net of taxes, on the sale or other disposition of assets (less all fees and expenses relating thereto and including the Capital Stock of any other Person) (but in no event shall this clause (ii) apply to the sale in the ordinary course of business of oil, gas or other hydrocarbons produced or manufactured or other personal property other than oil and gas in place); (iii) the net income of any Subsidiary of such specified Person to the extent the transfer to that Person of that income is restricted by contract or otherwise, except for any cash dividends or cash distributions actually paid by such Subsidiary to such Person during such period; (iv) the net income (or loss) of any other Person in which such specified Person or any of its Restricted Subsidiaries has an interest (which interest does not cause the net income of such other Person to be consolidated with the net income of such specified Person in accordance with GAAP or is an interest in a consolidated Unrestricted Subsidiary), except to the extent of the amount of cash dividends or other cash distributions actually paid to such Person or its Restricted Subsidiaries by such other Person during such period; (v) the net income of any Person acquired by such specified Person or any of its Restricted Subsidiaries in a pooling-of-interests transaction for any period prior to the date of such acquisition; (vi) any gain or loss, net of taxes, realized on the termination of any employee pension benefit plan; (vii) any adjustments of a deferred tax liability or asset pursuant to Statement of Financial Accounting Standards No. 109 which result from changes in enacted tax laws or rates; and (viii) the cumulative effect of a change in accounting principles. 6 "Consolidated Net Worth" of any Person means the stockholders' equity of ---------------------- such Person and its Restricted Subsidiaries, as determined on a consolidated basis in accordance with GAAP, less (to the extent included in stockholders' equity) amounts attributable to Redeemable Stock of such Person or its Restricted Subsidiaries. "Corporate Trust Office" means the office of the Trustee at which at any ---------------------- particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at 2200 Ross Avenue, 5th Floor, Dallas, Texas 75201. "Credit Agreement" means the Credit Agreement dated June 23, 1994, as ---------------- amended, from time to time, between the Company, The Wiser Oil Company of Canada, NationsBank of Texas, N.A., as agent, and certain banks. "Custodian" means any receiver, trustee, assignee, liquidator, custodian or --------- similar official under any Bankruptcy Law. "Designated Senior Indebtedness" when used with respect to the Company ------------------------------ means (i) any Senior Indebtedness of the Company under the Credit Agreement, and (ii) any Senior Indebtedness of the Company which has, at the time of determination, an aggregate principal amount outstanding of at least $10.0 million that is specifically designated in the instrument evidencing such Senior Indebtedness, and is designated in a notice delivered by the Company to the holders or a Representative of the holders of such Senior Indebtedness and the Trustee, as "Designated Senior Indebtedness" of the Company. When used with respect to a Subsidiary Guarantor, "Designated Senior Indebtedness" means (i) any Assigned Restricted Subsidiary Indebtedness of such Subsidiary Guarantor, (ii) any Indebtedness of such Subsidiary Guarantor under the Credit Agreement or a guarantee thereof and (iii) any Senior Indebtedness of such Subsidiary Guarantor which has, at the time of determination, an aggregate principal amount outstanding of at least $10.0 million and that is specifically designated in the instrument evidencing such Senior Indebtedness, and is designated in a notice delivered by the Subsidiary Guarantor to the holders or a Representative of the holders of such Senior Indebtedness and the Trustee, as "Designated Senior Indebtedness" of the Subsidiary Guarantor. "Dollar-Denominated Production Payments" means production payment -------------------------------------- obligations recorded as liabilities in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Default" means any event, act or condition the occurrence of which is, or ------- after notice or the passage of time or both would be, an Event of Default. "EBITDA" means with respect to any Person for any period, the Consolidated ------ Net Income of such Person for such period, plus (i) the sum of, to the extent reflected in the consolidated income statement of such Person and its Restricted Subsidiaries for such period from which Consolidated Net Income is determined and deducted in the determination of such Consolidated Net Income, without duplication, (A) income tax expense (but excluding income tax expense relating to sales or other disposition of assets (including the Capital Stock of any other Person) the gains and losses from which are excluded in the determination of such Consolidated Net Income), (B) Consolidated 7 Interest Expense, (C) depreciation and depletion expense, (D) amortization expense, (E) exploration expense, (F) any other noncash charges, including, without limitation, unrealized foreign exchange losses; less (ii) the sum of, to the extent reflected in the consolidated income statement of such Person and its Restricted Subsidiaries for such period from which Consolidated Net Income is determined and added in the determination of such Consolidated Net Income, without duplication, (A) income tax recovery (but excluding income tax recovery relating to sales or other dispositions of assets (excluding the Capital Stock of any other Person) the gains and losses from which are included in the determination of such Consolidated Net Income) and (B) unrealized foreign exchange gains. "Equity Offering" means a bona fide underwritten sale to the public of --------------- Capital Stock of the Company pursuant to a registration statement (other than a Form S-8 or any other form relating to securities issuable under any employee benefit plan of the Company) that is declared effective by the Commission following the Issue Date. "Event of Default" has the meaning specified in Section 6.01. ---------------- "Excess Proceeds" has the meaning specified in Section 4.06(c). --------------- "Exchange Act" means the Securities and Exchange Act of 1934. ------------ "Exchanged Properties" means properties used or useful in the Oil and Gas -------------------- Business received by the Company or a Restricted Subsidiary in trade or as a portion of the total consideration for other such properties. "Exchange Rate Contract" means, with respect to any Person, any currency ---------------------- swap agreements, forward exchange rate agreements, foreign currency futures or options, exchange rate collar agreements, exchange rate insurance and other agreements or arrangements, or any combination thereof, entered into for the purpose of limiting or managing exchange rate risks. "Fair Market Value" means, with respect to any assets to be transferred ----------------- pursuant to any Asset Sale or Sale and Leaseback Transaction or any non-cash consideration or property transferred or received by any Person, the fair market value of such consideration or property as determined in good faith by (i) any officer of the Company if such fair market value is less than $5.0 million and (ii) the Board of Directors of the Company as evidenced by a certified resolution delivered to the Trustee if such fair market value is equal to or in excess of $5.0 million; provided that if such resolution indicates that such -------- fair market value is equal to or in excess of $15.0 million and such transaction involves any Affiliate of the Company (other than a Restricted Subsidiary), such resolution shall be accompanied by the written opinion of an independent, nationally recognized investment banking firm or appraisal firm, in either case specializing or having a specialty in the type and subject matter of the transaction (or series of transactions) at issue, to the effect that such consideration or property is fair, from a financial point of view, to such Person. "Foreign Subsidiary" means a Restricted Subsidiary (other than The Wiser ------------------ Oil Company of Canada or any successor thereto) that is formed in a jurisdiction other than the United States or a State thereof or the District of Columbia, that engages in the Oil and Gas Business exclusively 8 outside the United States of America and that is treated as a corporation or an association taxable as a corporation for U.S. federal income tax purposes. "GAAP" means United States generally accepted accounting principles as in ---- effect on the date of this Indenture, unless stated otherwise. "Guarantee" by any Person means any obligation, contingent or otherwise, of --------- such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the "primary obligor") in any manner, whether --------------- directly or indirectly, and including, without limitation, any Lien on the assets of such Person securing obligations to pay Indebtedness of the primary obligor and any obligation of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase or payment of) any security for the payment of such Indebtedness, (ii) to purchase Property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness (and "Guaranteed," "Guaranteeing" and "Guarantor" shall have meanings correlative to ---------- ------------ --------- the foregoing); provided, however, that a Guarantee by any Person shall not -------- ------- include (A) endorsements by such Person for collection or deposit, in either case, in the ordinary course of business or (B) a contractual commitment by one Person to invest in another Person for so long as such Investment is reasonably expected to constitute a Permitted Investment under clause (ii) of the definition of Permitted Investments. "Holder" means the Person in whose name a Security is registered on the ------ Securities Register. "Incur" means, with respect to any Indebtedness or other obligation of any ----- Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings ---------- -------- ---------- --------- correlative to the foregoing); provided, however, that a change in GAAP that -------- ------- results in an obligation of such Person that exists at such time, and is not theretofore classified as Indebtedness, becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness. For purposes of this definition, Indebtedness of the Company or a Restricted Subsidiary held by a Wholly Owned Subsidiary shall be deemed to be Incurred by the Company or such Restricted Subsidiary in the event such Wholly Owned Subsidiary ceases to be a Wholly Owned Subsidiary or in the event such Indebtedness is transferred to a Person other than the Company or a Wholly Owned Subsidiary. For purposes of this definition, any non-interest bearing or other discount Indebtedness shall be deemed to have been incurred only on the date of the original issue thereof. "Indebtedness" means at any time (without duplication), with respect to any ------------ Person, whether recourse is to all or a portion of the assets of such Person, and whether or not contingent, (i) any Obligation of such Person for borrowed money, (ii) any Obligation of such Person evidenced by bonds, debentures, notes, Guarantees or other similar instruments, including, without limitation, any such Obligations Incurred in connection with the acquisition of Property, assets or businesses, (iii) any reimbursement obligation of such Person with respect to letters of credit, bankers' acceptances 9 or similar facilities issued for the account of such Person, (iv) any Obligation of such Person issued or assumed as the deferred purchase price of Property or services (other than Trade Accounts Payable and other accrued current liabilities incurred in the ordinary course of business), (v) any Capital Lease Obligation of such Person, (vi) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, (vii) any payment obligation of such Person under Exchange Rate Contracts, Interest Rate Protection Agreements or Oil and Gas Hedging Contracts at the time of determination, (viii) any obligation to pay rent or other payment amounts of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party and (ix) any obligation of the type referred to in clauses (i) through (viii) of this paragraph of another Person and all dividends of another Person the payment of which, in either case, such Person has Guaranteed or is responsible or liable, directly or indirectly, as obligor, Guarantor or otherwise; provided that Indebtedness shall not include Production Payments and -------- Reserve Sales. For purposes of this definition, the maximum fixed repurchase price of any Redeemable Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Redeemable Stock as if such Redeemable Stock were repurchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture; provided, however, that if -------- ------- such Redeemable Stock is not then permitted to be repurchased, the repurchase price shall be the book value of such Redeemable Stock. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional Obligations as described above and the maximum liability at such date in respect of any contingent Obligations described above. "Initial Subsidiary Guarantors" means Wiser Oil Delaware, Inc., a Delaware ----------------------------- corporation, The Wiser Marketing Company, a Delaware corporation, Wiser Delaware LLC, a Delaware limited liability company, T.W.O.C., Inc., a Delaware corporation, and The Wiser Oil Company of Canada, a Nova Scotia unlimited liability company, and any successors thereto. "Interest Rate Protection Agreement" means, with respect to any Person, any ---------------------------------- interest rate swap agreement, forward rate agreement, interest rate cap or collar agreement or other financial agreement or arrangement entered into for the purpose of limiting or managing interest rate risks to or under which such Person is a party or otherwise obligated. "Investment" means, with respect to any Person (i) any amount paid by such ---------- Person, directly or indirectly to any other Person for Capital Stock or other Property of, or as a capital contribution to, any other Person or (ii) any direct or indirect loan or advance to any other Person (other than accounts receivable of such Person arising in the ordinary course of business); provided, -------- however, that Investments shall not include extensions of trade credit on - ------- commercially reasonable terms in accordance with normal trade practices and any increase in the equity ownership in any Person resulting from retained earnings of such Person. "Issue Date" means the date on which the Initial Securities first were ---------- issued under this Indenture. "Lien" means, with respect to any Property, any mortgage or deed of trust, ---- pledge, hypothecation, assignment, deposit arrangement, security interest, lien (statutory or other), charge, easement, encumbrance, preference, priority or other security or similar agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including, without 10 limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing). For purposes of Section 4.10, a Capital Lease Obligation shall be deemed to be secured by a Lien on the Property being leased. "Liquid Securities" means securities (i) of an issuer that is not an ----------------- Affiliate of the Company, (ii) that are publicly traded on the New York Stock Exchange, the American Stock Exchange or the Nasdaq National Market and (iii) as to which the Company is not subject to any restrictions on sale or transfer (including any volume restrictions under Rule 144 under the Securities Act or any other restrictions imposed by the Securities Act) or as to which a registration statement under the Securities Act covering the resale thereof is in effect for as long as the securities are held; provided that securities -------- meeting the requirements of clauses (i), (ii) and (iii) above shall be treated as Liquid Securities from the date of receipt thereof until and only until the earlier of (x) the date on which such securities are sold or exchanged for cash or Permitted Short-Term Investments and (y) 120 days following the date of receipt of such securities. If such securities are not sold or exchanged for cash or Permitted Short-Term Investments within 120 days of receipt thereof, for purposes of determining whether the transaction pursuant to which the Company or a Restricted Subsidiary received the securities was in compliance with Section 4.06, such securities shall be deemed not to have been Liquid Securities at any time. "Material Change" means an increase or decrease (except to the extent --------------- resulting from changes in prices) of more than 30% during a fiscal quarter in the estimated discounted future net revenues from proved oil and gas reserves of the Company and its Restricted Subsidiaries, calculated in accordance with clause (i)(A) of the definition of Adjusted Consolidated Net Tangible Assets; provided, however, that the following will be excluded from the calculation of - -------- ------- Material Change: (i) any acquisitions during the quarter of oil and gas reserves with respect to which the Company's estimate of the discounted future net revenues from proved oil and gas reserves has been confirmed by independent petroleum engineers and (ii) any dispositions of Properties during such quarter that were disposed of in compliance with Section 4.06. "Material Restricted Subsidiary" means any Restricted Subsidiary that, ------------------------------ together with its Subsidiaries, (i) accounted for more than 5% of the consolidated revenues of the Company and its Restricted Subsidiaries, taken as a whole, for the most recently completed fiscal year of the Company, or (ii) was the owner of more than 5% of the consolidated assets of the Company and its Restricted Subsidiaries, taken as a whole, at the end of such fiscal year, all as shown in the case of (i) and (ii) on the consolidated financial statements of the Company and its Restricted Subsidiaries for such fiscal year. "Net Available Cash" from an Asset Sale means cash proceeds received ------------------ therefrom (including (i) any cash proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, and (ii) the Fair Market Value of Liquid Securities and Permitted Short-Term Investments, and excluding (A) any consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets, and (B) except to the extent subsequently converted to cash, Liquid Securities or Permitted Short-Term Investments within 240 days after such Asset Sale, consideration constituting Exchanged Properties or consideration other than Permitted Consideration), in each case net of (i) all legal, title and recording expenses, commissions and other 11 fees and expenses incurred, and all federal, state, foreign and local taxes required to be paid or accrued as a liability under GAAP as a consequence of such Asset Sale, (ii) all payments (which payments are made in a manner that results in the permanent reduction in the balance of such Indebtedness and, if applicable, a permanent reduction in any outstanding commitment for future incurrences of Indebtedness thereunder) made on any Indebtedness (but specifically excluding Indebtedness of the Company and its Restricted Subsidiaries assumed in connection with or in anticipation of such Asset Sale) which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale or by applicable law, be repaid out of the proceeds from such Asset Sale, (iii) all distributions and other payments required to be made to minority interest holders in Restricted Subsidiaries or joint ventures as a result of such Asset Sale, and (iv) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the assets disposed of in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale (to the extent such reserves are not subsequently reversed within 365 days after such Asset Sale); provided, however, -------- ------- that if any consideration for an Asset Sale (which would otherwise constitute Net Available Cash) is required to be held in escrow pending determination of whether a purchase price adjustment will be made, such consideration (or any portion thereof) shall become Net Available Cash only at such time as it is released to the Company or its Restricted Subsidiaries from escrow; and provided, further, however, that any Exchanged Properties and any consideration - -------- ------- ------- other than Permitted Consideration received in connection with an Asset Sale which is subsequently converted to cash, Liquid Securities or Permitted Short- Term Investments within 240 days after such Asset Sale shall be deemed to be Net Available Cash at such time and shall thereafter be applied in accordance with Section 4.06. "Moody's" means Moody's Investors Service, Inc. and its successors. ------- "Net Working Capital" means (i) all current assets of the Company and its ------------------- Restricted Subsidiaries, less (ii) all current liabilities of the Company and its Restricted Subsidiaries, except current liabilities included in Indebtedness, in each case as set forth in financial statements of the Company prepared in accordance with GAAP. "Obligation" means any principal, interest, premium, penalty, fee and any ---------- other liability payable under the documentation governing any Indebtedness. "Officer" means the Chairman of the Board, the Chief Executive Officer, the ------- Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officer's Certificate" means a certificate signed by two Officers meeting --------------------- the requirements set forth in Section 13.01 and delivered to the Trustee. "Oil and Gas Business" means the business of exploiting, exploring for, -------------------- developing, acquiring, producing, processing, gathering, marketing, storing, selling, hedging, swapping and transporting hydrocarbons and other related energy businesses. "Oil and Gas Hedging Contract" means, with respect to any Person, any ---------------------------- agreement or arrangement, or any combination thereof, financially tied to oil and gas or other hydrocarbon prices, 12 transportation or basis costs or differentials, or similar factors, that is customary in the Oil and Gas Business and is entered into for the purpose of limiting or managing risks associated with fluctuations in such prices, costs, differentials or similar factors. "Oil and Gas Liens" means (i) Liens on a specific oil or gas property or ----------------- any interest therein, construction thereon or improvement thereto to secure all or any part of the costs incurred for surveying, exploration, drilling, extraction, development, operation, production, construction, alteration, repair or improvement of, in, under or on such property and the plugging and abandonment of wells located thereon (it being understood that, in the case of oil and gas producing properties, or any interest therein, costs incurred for "development" shall include costs incurred for all facilities relating to such properties or to projects, ventures or other arrangements of which such properties form a part or which relate to such properties or interests); (ii) Liens on an oil or gas producing property to secure obligations Incurred or guarantees of obligations Incurred in connection with or necessarily incidental to commitments for the purchase or sale of, or the transportation or distribution of, the products derived from such property; (iii) Liens arising under partnership agreements, oil and gas leases, overriding royalty agreements, net profits agreements, production payment agreements, royalty trust agreements, master limited partnership agreements, farm-out agreements, division orders, contracts for the sale, purchase, exchange, transportation, gathering or processing of oil, gas or other hydrocarbons, unitizations and pooling designations, declarations, orders and agreements, development agreements, operating agreements, production sales contracts, area of mutual interest agreements, gas balancing or deferred production agreements, injection, repressuring and recycling agreements, salt water or other disposal agreements, seismic or geophysical permits or agreements, and other agreements which are customary in the Oil and Gas Business, provided in all instances that such Liens are limited to the assets that are the subject of the relevant agreement; (iv) Liens arising in connection with Production Payments and Reserve Sales; and (v) Liens on pipelines or pipeline facilities that arise by operation of law. "Opinion of Counsel" means a written opinion from legal counsel who is ------------------ acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Order" means a written order signed in the name of the Company by an ----- Officer and delivered to the Trustee. "Pari Passu Indebtedness" means any Indebtedness of the Company (or a ----------------------- Subsidiary Guarantor) that is pari passu in right of payment to the Securities (or a Subsidiary Guaranty, as appropriate). "Pari Passu Offer" means an offer by the Company or a Subsidiary Guarantor ---------------- to purchase all or a portion of Pari Passu Indebtedness to the extent required by the indenture or other agreement or instrument pursuant to which such Pari Passu Indebtedness was issued. "Paying Agent" has the meaning specified in Section 2.03. ------------ "Permitted Business Investments" means Investments and expenditures made in ------------------------------ the ordinary course of, and of a nature that is or shall have become customary in, the Oil and Gas Business as a means of actively engaging therein through agreements, transactions, interests or arrangements which 13 permit one to share risks or costs, comply with regulatory requirements regarding local ownership or satisfy other objectives customarily achieved through the conduct of Oil and Gas Business jointly with third parties, including, without limitation, (i) ownership interests in oil and gas properties or gathering, transportation, processing, storage or related systems and (ii) Investments and expenditures in the form of or pursuant to operating agreements, processing agreements, farm-in agreements, farm-out agreements, development agreements, area of mutual interest agreements, unitization agreements, pooling arrangements, joint bidding agreements, service contracts, joint venture agreements, partnership agreements (whether general or limited), subscription agreements, stock purchase agreements and other similar agreements with third parties (including Unrestricted Subsidiaries). "Permitted Consideration" has the meaning assigned to such term in Section ----------------------- 4.06. "Permitted Hedging Agreements" means (i) Exchange Rate Contracts and Oil ---------------------------- and Gas Hedging Contracts to the extent entered into to limit or manage risks incurred in the ordinary course of business and (ii) Interest Rate Protection Agreements but only to the extent that the stated aggregate notional amount thereunder does not exceed 100% of the aggregate principal amount of the Indebtedness of the Company or a Restricted Subsidiary covered by such Interest Rate Protection Agreements at the time such agreements were entered into. "Permitted Indebtedness" has the meaning specified in Section 4.03. ---------------------- "Permitted Investments" means any and all of the following: (i) Permitted --------------------- Short-Term Investments; (ii) Investments in property, plant and equipment used in the ordinary course of business and Permitted Business Investments; (iii) Investments by any Restricted Subsidiary in the Company; (iv) Investments by the Company or any Restricted Subsidiary in any Restricted Subsidiary; (v) Investments by the Company or any Restricted Subsidiary in a Person where that Person becomes a Restricted Subsidiary or transfers or assigns all of its assets to the Company (including the acquisition from a third party of the Capital Stock of a Restricted Subsidiary or any other Person) if such Person or a Subsidiary of such Person will, as a result of the making of such Investment and all other contemporaneous related transactions, become a Restricted Subsidiary or be merged or consolidated with or transfer or convey all or substantially all of its assets to the Company or a Restricted Subsidiary; (vi) Investments in the form of securities received from Asset Sales, provided that such Asset Sales are -------- made in compliance with Section 4.06; (vii) Investments in negotiable instruments held for collection, lease, utility and other similar deposits, and stock, obligations or securities received in settlement of debts (including, without limitation, under any bankruptcy or other similar proceeding) owing to the Company or any of its Restricted Subsidiaries as a result of the foreclosure, perfection or enforcement of any Liens or Indebtedness, in each of the foregoing cases in the ordinary course of business of the Company or such Restricted Subsidiary; (viii) Investments in the form of Permitted Hedging Agreements of the Company and its Restricted Subsidiaries; (ix) relocation allowances, advances and loans to officers, directors and employees of the Company or any of its Restricted Subsidiaries in the ordinary course of business, provided such items do not exceed in the aggregate $2.0 million at any -------- one time outstanding; and (x) Investments pursuant to any agreement or obligation of the Company or any of its Restricted Subsidiaries as in effect on the Issue Date (other than Investments described in clauses (i) through (ix) above). 14 "Permitted Liens" means any and all of the following: (i) Liens existing as --------------- of the Issue Date; (ii) Liens securing the Securities, the Subsidiary Guaranties and other obligations arising under this Indenture; (iii) any Lien existing on any Property (including future improvements thereon, accessions thereto and proceeds thereof) of a Person at the time such Person is merged or consolidated with or into the Company or a Subsidiary Guarantor or becomes a Restricted Subsidiary that is a Subsidiary Guarantor (and not incurred in anticipation of or in connection with such transaction), provided that such Liens are not -------- extended to other Property of the Company or the Subsidiary Guarantors; (iv) any Lien existing on any Property (including future improvements thereon, accessions thereto and proceeds thereof) at the time of the acquisition thereof (and not incurred in anticipation of or connection with such transaction), provided that -------- such Liens are not extended to other Property of the Company or the Subsidiary Guarantors; (v) any Lien incurred in the ordinary course of business incidental to the conduct of the business of the Company or the Subsidiary Guarantor or the ownership of their Property (including, without limitation, (A) easements, rights of way and similar encumbrances, (B) rights or title of lessors under leases (other than Capital Lease Obligations), (C) rights of collecting banks having rights of setoff, revocation, refund or chargeback with respect to money or instruments of the Company or the Subsidiary Guarantors or on deposit with or in the possession of such banks, (D) Liens imposed by law, including without limitation, Liens under workers' compensation or similar legislation and mechanics', carriers', warehousemens', materialmens', suppliers' and vendors' Liens, (E) Liens incurred to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and incurred in a manner consistent with industry practice, and (F) Liens on deposits made in the ordinary course of business), in each case which are not incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of Property (other than Trade Accounts Payable) and which do not in the aggregate impair in any material respect the use of Property in the operation of the business of the Company and its Restricted Subsidiaries taken as a whole; (vi) Liens for taxes, assessments and governmental charges not yet due or the validity of which are being contested in good faith by appropriate proceedings, promptly instituted and diligently conducted, and for which adequate reserves have been established to the extent required by GAAP; (vii) Liens incurred to secure appeal bonds and judgment and attachment Liens, in each case in connection with litigation or legal proceedings that are being contested in good faith by appropriate proceedings so long as reserves have been established to the extent required by GAAP in effect at such time and so long as such Liens do not encumber assets by an amount in excess of $15.0 million; (viii) Liens securing Permitted Hedging Agreements of the Company and its Restricted Subsidiaries; (ix) Oil and Gas Liens Incurred in the ordinary course of the business of the Company and its Restricted Subsidiaries; (x) purchase money security interests (including, without limitation, Capital Lease Obligations) granted in connection with the acquisition of fixed assets in the ordinary course of business of the Company and its Restricted Subsidiaries, provided, that (A) such Liens attach only to -------- the Property (including future improvements thereon, accessions thereto and proceeds thereof) so acquired with the purchase money Indebtedness secured thereby and (B) the Indebtedness secured by such Liens is not in excess of the purchase price of such Property; (xi) Liens resulting from the deposit of funds or evidences of Indebtedness in trust for the purpose of decreasing or defeasing Indebtedness of the Company or any of its Subsidiaries so long as such deposit of funds is permitted under Section 4.04; (xii) Liens resulting from a pledge of Capital Stock of a Person that is not a Restricted Subsidiary; (xiii) Liens to secure any permitted extension, renewal, refinancing, refunding or exchange (or successive extensions, renewals, refinancings, refundings or exchanges), in whole or in part, of or 15 for any Indebtedness secured by Liens referred to in clauses (i), (ii), (iii), (iv) and (x) above; provided, however, that (A) such new Lien shall be limited -------- ------- to all or part of the same Property (including future improvements thereon, accessions thereto and proceeds thereof) that secured the original Lien and (B) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (1) the outstanding principal amount, or if greater, the committed amount of the Indebtedness secured by such original Lien immediately prior to such extension, renewal, refinancing, refunding or exchange and (2) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; (xiv) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Company or its Restricted Subsidiaries relating to such property or assets; and (xv) Liens in favor of the Company or a Subsidiary Guarantor. Notwithstanding anything in this paragraph to the contrary, the term "Permitted Liens" does not include Liens resulting from the creation, incurrence, issuance, assumption or Guarantee of any Production Payment and Reserve Sale other than (1) Production Payments and Reserve Sales in connection with the acquisition of Properties after the Issue Date, provided -------- that any such Liens created in connection therewith are created, incurred, issued, assumed or guaranteed in connection with the financing of, and within 60 days after, the acquisition of the Property that is subject thereto, (2) Production Payments and Reserve Sales other than those described in clause (1) of this sentence to the extent such Production Payments and Reserve Sales constitute Asset Sales made pursuant to and in compliance with Section 4.06, or (3) Oil and Gas Liens that are not Dollar-Denominated Production Payments or Volumetric Production Payments that are incurred in the ordinary course of business of the Company and its Restricted Subsidiaries and that may be deemed under the definition of Production Payments and Reserve Sales to constitute Production Payments and Reserve Sales. "Permitted Refinancing Indebtedness" means Indebtedness ("new ---------------------------------- Indebtedness") Incurred in exchange for, or the proceeds of which are used to refinance, other Indebtedness ("old Indebtedness"), provided, however, that (i) -------- ------- such new Indebtedness is in an aggregate principal amount not in excess of the sum of (A) the aggregate principal amount then outstanding of the old Indebtedness (or, if such old Indebtedness provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration thereof, such lesser amount as of the date of determination), and (B) an amount necessary to pay any fees and expenses, including premiums related to such exchange or refinancing, (ii) such new Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the old Indebtedness, (iii) such new Indebtedness has an Average Life to Stated Maturity at the time such new Indebtedness is Incurred that is equal to or greater than the Average Life to Stated Maturity of the old Indebtedness at such time and (iv) such new Indebtedness is subordinated in right of payment to Senior Indebtedness of the Company (or, if applicable, Senior Indebtedness of a Subsidiary Guarantor) and the Securities (or, if applicable, the Subsidiary Guaranties) to at least the same extent, if any, as the old Indebtedness. "Permitted Short-Term Investments" means (i) Investments in U.S. Government -------------------------------- Obligations maturing within one year of the date of acquisition thereof, (ii) Investments in demand accounts, time deposit accounts, certificates of deposit, bankers acceptances and money market deposits maturing within one year of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any State thereof or the District of Columbia that is a member of the Federal Reserve System having capital, surplus and undivided 16 profits aggregating in excess of $500.0 million and whose long-term indebtedness is rated "A" (or higher) according to Moody's, (iii) Investments in demand accounts, time deposit accounts, certificates of deposit, bankers acceptances and money market deposits maturing within one year of the date of acquisition thereof issued by a Canadian bank to which the Bank Act (Canada) applies having capital, surplus and undivided profits aggregating in excess of U.S. $500.0 million, (iv) Investments in deposits available for withdrawal on demand with any commercial bank that is organized under the laws of any country in which the Company or any Restricted Subsidiary maintains an office or is engaged in the Oil and Gas Business, provided that (A) all such deposits have been made in -------- such accounts in the ordinary course of business and (B) such deposits do not at any one time exceed $20.0 million in the aggregate, (v) repurchase and reverse repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) entered into with a bank meeting the qualifications described in either clause (ii) or (iii), (vi) Investments in commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America or any State thereof or the District of Columbia with a rating at the time as of which any Investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P, and (vii) Investments in any money market mutual fund having assets in excess of $250.0 million substantially all of which consist of obligations of the types described in clauses (i), (ii), (v) and (vi) hereof. "Person" means any individual, corporation, partnership, joint venture, ------ limited liability company, unlimited liability company, trust, estate, unincorporated organization or government or any agency or political subdivision thereof. "Preferred Stock" of any Person means Capital Stock of such Person of any --------------- class or classes (however designated) that ranks prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of capital stock of any other class of such Person; provided, however, that "Preferred -------- ------- Stock" shall not include Redeemable Stock. "Principal" of any Indebtedness (including the Securities) means the --------- principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "Principal Agent" means, on any date, (i) if the Credit Agreement shall --------------- remain in effect on such date, the administrative agent(s) (or the institution(s) performing similar functions) under the Credit Agreement and (ii) if the Credit Agreement is no longer in effect on such date, the administrative agent(s) (or the institution(s) performing similar functions) with respect to the Designated Senior Indebtedness (or, if applicable, Designated Senior Indebtedness of such Subsidiary Guarantor) having the highest principal amount (including all revolving credit, letter of credit and other working capital commitments) on such date. "Production Payments and Reserve Sales" means the grant or transfer by the ------------------------------------- Company or a Restricted Subsidiary to any Person of a royalty, overriding royalty, net profits interest, production payment (whether volumetric or dollar denominated), partnership or other interest in oil and gas properties, reserves or the right to receive all or a portion of the production or the proceeds from the sale of production attributable to such properties where the holder of such interest has recourse solely 17 to such production or proceeds of production, subject to the obligation of the grantor or transferor to operate and maintain, or cause the subject interests to be operated and maintained, in a reasonably prudent manner or other customary standard or subject to the obligation of the grantor or transferor to indemnify for environmental, title or other matters customary in the Oil and Gas Business. "Property" means, with respect to any Person, any interest of such Person -------- in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including, without limitation, Capital Stock and other securities issued by any other Person (but excluding Capital Stock or other securities issued by such first mentioned Person). "Redeemable Stock" of any Person means any equity security of such Person ---------------- that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or otherwise (including on the happening of an event), is or could become required to be redeemed for cash or other Property or is or could become redeemable for cash or other Property at the option of the holder thereof, in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Securities; or is or could become exchangeable at the option of the holder thereof for Indebtedness at any time in whole or in part, on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that Redeemable Stock shall not include any security by - -------- ------- virtue of the fact that it may be exchanged or converted at the option of the holder for Capital Stock of the Company having no preferences as to dividends or liquidation over any other Capital Stock of the Company. "Registrar" has the meaning specified in Section 2.03. --------- "Representative" means any trustee, agent or representative expressly -------------- authorized to act in such capacity, if any, for an issue of Senior Indebtedness. "Responsible Officer" means, when used with respect to the Trustee, any ------------------- officer assigned to the Corporate Trust Office, including any vice president, assistant vice president, assistant secretary or any other officer of the Trustee to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject. "Restricted Payment" means (i) a dividend or other distribution declared or ------------------ paid on the Capital Stock or Redeemable Stock of the Company or to the Company's stockholders (other than dividends, distributions or payments made solely in Capital Stock of the Company or in options, warrants or other rights to purchase or acquire Capital Stock or Redeemable Stock), or declared and paid to any Person other than the Company or any of its Restricted Subsidiaries on the Capital Stock or Redeemable Stock of any Restricted Subsidiary, (ii) a payment made by the Company or any of its Restricted Subsidiaries (other than to the Company or any Restricted Subsidiary) to purchase, redeem, acquire or retire any Capital Stock or Redeemable Stock or any options, warrants or other rights to acquire such Capital Stock or Redeemable Stock of the Company or of a Restricted Subsidiary, (iii) a payment made by the Company or any of its Restricted Subsidiaries to redeem, repurchase, defease or otherwise acquire or retire for value (including pursuant to mandatory repurchase covenants), prior to any scheduled maturity, scheduled sinking fund or scheduled mandatory redemption, any Pari Passu Indebtedness or any Indebtedness of the Company which is subordinate (whether pursuant to its terms or by operation of law) in right of payment to the 18 Securities except (a) to the extent Pari Passu Indebtedness may be purchased out of Net Available Cash in compliance with Section 4.06; (b) a Pari Passu Offer, (c) to the extent of Excess Proceeds remaining after compliance with Section 4.06 and to the extent required by the indenture or other agreement or instrument pursuant to which any Subordinated Indebtedness was issued, an offer to purchase such Subordinated Indebtedness upon a disposition of assets and (d) upon a "Change of Control" (even if such event is not a Change of Control hereunder) to the extent required by the indenture or other agreement or instrument pursuant to which any Pari Passu Indebtedness or Subordinated Indebtedness was issued provided the Company is then in compliance with Section 4.09, (iv) an Investment (other than a Permitted Investment) by the Company or a Restricted Subsidiary in any Person other than the Company or a Restricted Subsidiary, or (v) the sale or issuance of Capital Stock of a Restricted Subsidiary to a Person other than the Company or another Restricted Subsidiary if the result thereof is that such Restricted Subsidiary shall cease to be a Restricted Subsidiary, in which event the amount of such Restricted Payment shall be the Fair Market Value of the remaining interest, if any, in such former Restricted Subsidiary held by the Company and its other Restricted Subsidiaries. "Restricted Subsidiary" means any Subsidiary of the Company that has not --------------------- been designated as an Unrestricted Subsidiary pursuant to the terms of this Indenture. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw- --- Hill Companies, Inc., and its successors. "Sale and Leaseback Transaction" means, with respect to any Person, any ------------------------------ direct or indirect arrangement (excluding, however, any such arrangement between such Person and a Wholly Owned Restricted Subsidiary of such Person or between one or more Wholly Owned Restricted Subsidiaries of such Person) pursuant to which Property is sold or transferred by such Person or a Restricted Subsidiary of such Person and is thereafter leased back from the purchaser or transferee thereof by such Person or one of its Restricted Subsidiaries. "Securities Act" means the Securities Act of 1933. -------------- "Securities Register" has the meaning specified in Section 2.03 hereof. ------------------- "Security" has the meaning stated in the first paragraph of this Indenture -------- and more particularly means any Security authenticated and delivered under this Indenture. "Senior Credit Facilities" means collectively, one or more senior credit ------------------------ facilities or commercial paper facilities with banks or other institutional lenders (including, without limitation, the credit facility pursuant to the Credit Agreement), together with any guaranties, security and related documents, as all such credit facilities and documents may be amended, supplemented, extended, increased, refinanced or replaced from time to time. "Senior Indebtedness" when used with respect to the Company means the ------------------- Obligations of the Company with respect to Indebtedness of the Company (including all Indebtedness under the Senior Credit Facilities), whether outstanding on the date hereof or hereafter created, incurred or assumed, and any renewal, refunding, refinancing, replacement or extension thereof, unless, in the case of any 19 particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Securities; provided that Senior Indebtedness of the Company shall not include (i) Indebtedness of the Company to a Subsidiary of the Company, (ii) amounts owed for goods, materials or services purchased in the ordinary course of business, (iii) Indebtedness incurred in violation of this Indenture, (iv) amounts payable or any other Indebtedness to employees of the Company or any Subsidiary of the Company, (v) any liability for federal, state, local or other taxes owed or owing by the Company, (vi) any indebtedness of the Company that, when incurred and without regard to any election under Section 1111(b) of the United States Bankruptcy Code, was without recourse to the Company, (vii) Pari Passu or Subordinated Indebtedness of the Company, (viii) Indebtedness of the Company that is represented by Redeemable Stock, and (ix) Indebtedness evidenced by the Securities. When used with respect to a Subsidiary Guarantor, "Senior Indebtedness" means the Obligations of a Subsidiary Guarantor with respect to Indebtedness (including all Indebtedness under the Senior Credit Facilities) of such Subsidiary Guarantor, whether outstanding on the date hereof or hereafter created, incurred or assumed, and any renewal, refunding, refinancing, replacement or extension thereof, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Subsidiary Guaranties; provided that -------- Senior Indebtedness of a Subsidiary Guarantor shall not include (i) Indebtedness of such Subsidiary Guarantor to the Company or a Subsidiary of the Company (other than Assigned Restricted Subsidiary Indebtedness), (ii) amounts owed for goods, materials or services purchased in the ordinary course of business, (iii) Indebtedness incurred in violation of this Indenture, (iv) amounts payable or any other Indebtedness to employees of the Company or any Subsidiary of the Company, (v) any liability for federal, state, local or other taxes owed or owing by such Subsidiary Guarantor, (vi) any Indebtedness of such Subsidiary Guarantor that, when incurred and without regard to any election under Section 1111 (b) of the United States Bankruptcy Code, was without recourse to such Subsidiary Guarantor, (vii) Pari Passu or Subordinated Indebtedness of such Subsidiary Guarantor, (viii) Indebtedness of such Subsidiary Guarantor that is represented by Redeemable Stock, and (ix) Indebtedness evidenced by the Securities and the Subsidiary Guaranties. "Significant Subsidiary" means, at any date of determination, any ---------------------- Subsidiary of a Person that, together with its Subsidiaries, (i) for the most recent fiscal year of such Person, accounted for more than 5% of the consolidated revenues of such Person and its Subsidiaries or (ii) as of the end of such fiscal year, was the owner of more than 5% of the consolidated assets of such Person and its Subsidiaries. "Stated Maturity" when used with respect to any security or any installment --------------- of principal thereof or interest thereon, means the date specified in such security as the fixed date on which the principal of such security or such installment of principal or interest is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Indebtedness" means Indebtedness of the Company (or a ------------------------- Subsidiary Guarantor) that is expressly subordinated in right of payment to the Securities (or a Subsidiary Guaranty, as appropriate). 20 "Subsidiary" of a Person means (i) another Person which is a corporation a ---------- majority of whose Voting Stock is at the time, directly or indirectly, owned or controlled by (A) the first Person, (B) the first Person and one or more of its Subsidiaries or (C) one or more of the first Person's Subsidiaries or (ii) another Person which is not a corporation (A) at least 50% of the ownership interest of which and (B) the power to elect or direct the election of a majority of the directors or other governing body of which are controlled by Persons referred to in clause (i)(A), (i)(B) or (i)(C) above. "Subsidiary Guarantors" means (i) as of the Issue Date, the Initial --------------------- Subsidiary Guarantors, and (ii) thereafter, unless released from their Subsidiary Guaranties as permitted by this Indenture, the Initial Subsidiary Guarantors and any other Restricted Subsidiary that becomes a guarantor of the Securities in compliance with the provisions of this Indenture and executes a supplemental indenture agreeing to be bound by the terms of this Indenture. "Subsidiary Guaranty" means an unconditional, unsecured senior subordinated ------------------- guaranty of the Securities given by any Restricted Subsidiary pursuant to the terms of Article 11 of this Indenture. "Trade Accounts Payable" means accounts payable or other obligations of the ---------------------- Company or any Restricted Subsidiary to trade creditors created or assumed by the Company or such Restricted Subsidiary in the ordinary course of business in connection with the obtaining of goods or services. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as ------------------- --- amended, as in force at the date as of which this Indenture was executed. "Trustee" means the Person named as the "Trustee" in the first paragraph of ------- this Indenture until a successor Trustee shall have become such pursuant to the applicable provision of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "Uniform Commercial Code" means the New York Uniform Commercial Code as in ----------------------- effect from time to time. "Unrestricted Subsidiary" means (i) each Subsidiary of the Company that the ----------------------- Company has designated pursuant to Section 4.12 as an Unrestricted Subsidiary and (ii) any Subsidiary of an Unrestricted Subsidiary. "U.S. Government Obligations" means securities that are (i) direct --------------------------- obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America, the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian, with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt; provided, however, that (except as required -------- ------- by law) such custodian is not authorized to make 21 any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt. "Volumetric Production Payments" means production payment obligations ------------------------------ recorded as deferred revenue in accordance with GAAP, together with all undertakings and obligations in connection therewith. "Voting Stock" of any Person means Capital Stock of such Person which ------------ ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency. "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the ---------------------------------- extent (i) all of the Capital Stock or other ownership interests in such Restricted Subsidiary, other than any directors' qualifying shares mandated by applicable law, is owned directly or indirectly by the Company or (ii) such Restricted Subsidiary does substantially all of its business in one or more foreign jurisdictions and is required by the applicable laws and regulations of such foreign jurisdiction to be partially owned by the government of any such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Restricted Subsidiary to transact business in such foreign jurisdiction, provided that the Company, directly or indirectly, owns the remaining Capital Stock or ownership interest in such Restricted Subsidiary and, by contract or otherwise, controls the management and business of such Restricted Subsidiary and derives the economic benefits of ownership of such Restricted Subsidiary to substantially the same extent as if such Restricted Subsidiary were a Wholly Owned Subsidiary. "Wholly Owned Subsidiary" means any Subsidiary of the Company to the extent ----------------------- (i) all of the Capital Stock or other ownership interests in such Subsidiary, other than any directors' qualifying shares mandated by applicable law, is owned directly or indirectly by the Company or (ii) such Subsidiary does substantially all of its business in one or more foreign jurisdictions and is required by the applicable laws and regulations of any such foreign jurisdiction to be partially owned by the government of such foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Subsidiary to transact business in such foreign jurisdiction, provided that the Company, directly or indirectly, owns the remaining Capital Stock or ownership interest in such Subsidiary and, by contract or otherwise, controls the management and business of such subsidiary and derives the economic benefits of ownership of such Subsidiary to substantially the same extent as if such subsidiary were a Wholly Owned Subsidiary. SECTION 1.02. Incorporation by Reference of Trust Indenture Act. This -------------------------------------------------- Indenture is subject to the provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "indenture securities" means the Securities. "indenture security holder" means a Holder. 22 "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by Commission rule have the meanings assigned to them by such definitions. SECTION 1.03. Rules of Construction. Except as otherwise expressly ---------------------- provided or unless the context otherwise requires: (1) a term has the meaning assigned to it in this Indenture; (2) an accounting term not otherwise defined herein has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; (7) any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Indenture; (8) provisions apply to successive events and transactions; (9) references to agreements and other instruments include subsequent amendments and waivers but only to the extent not prohibited by this Indenture; and (10) all dollar amounts are expressed in United States dollars. 23 ARTICLE 2 The Securities -------------- SECTION 2.01. Form and Dating. Provisions relating to the Initial ---------------- Securities and the Exchange Securities are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby --------- ---------- incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and --------- expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company and the Trustee). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit 1 to Appendix A and Exhibit A are part of the --------- ---------- --------- terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign the ----------------------------- Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain an --------------------------- office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may --------- be presented for payment (the "Paying Agent"). The Registrar shall keep a ------------ register of the Securities and of their transfer and exchange (the "Securities ---------- Register"). The Company may have one or more co-registrars and one or more - -------- additional paying agents; provided, however, that so long as Texas Commerce Bank -------- ------- National Association shall be the Trustee, without the consent of the Trustee, there shall be no more than one Registrar or Paying Agent. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain 24 a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate comp ensation therefor pursuant to Section 7.07. Except during the continuance of an Event of Default, the Company or any of its domestically incorporated Wholly Owned Restricted Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due ------------------------------------ date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Holder Lists. The Trustee shall preserve in as current a ------------- form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date, redemption date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders. SECTION 2.06. Replacement Securities. If a mutilated Security is ----------------------- surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee, upon receipt of a written order of the Company in the form of an Officer's Certificate, shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.07. Outstanding Securities. Securities outstanding at any time ----------------------- are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to Section 13.07, a Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. 25 If a Security is replaced pursuant to Section 2.06, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser, in which event the replacement Security shall cease to be outstanding, subject to the provisions of Section 8-405 of the Uniform Commercial Code. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money or U.S. Government Obligations sufficient to pay all principal, premium, if any, and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.08. Temporary Securities. Until definitive Securities are --------------------- ready for delivery, the Company may prepare and the Trustee shall, upon receipt of a written order of the Company in the form of an Officer's Certificate, authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall, upon receipt of a written order of the Company in the form of an Officer's Certificate, authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.09. Cancellation. The Company at any time may deliver ------------- Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation and deliver a certificate of such destruction to the Company. Subject to Section 2.06 hereto and Section 2.03 of Appendix A, the Company may ---------- not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.10. Defaulted Interest. If the Company defaults in a payment ------------------- of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the Persons who are Holders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Holder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.11. CUSIP Numbers. The Company in issuing the Securities may -------------- use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, -------- however, that any such notice may state that no representation is made as to the - ------- correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 26 ARTICLE 3 Redemption ---------- SECTION 3.01. Notices to Trustee. If the Company elects to redeem ------------------- Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur. The Company shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officer's Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all --------------------------------------- the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed in compliance with the requirements of the principal national securities exchange, if any, on which the Securities are listed, or if the Securities are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them that the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provi sions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than --------------------- 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; 27 (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section at least 45 days before the redemption date. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption ------------------------------- is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date. Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, ---------------------------- the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security ---------------------------- that is redeemed in part, the Company shall execute and the Trustee shall, upon receipt of a written order of the Company in the form of an Officer's Certificate, authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4 Covenants --------- SECTION 4.01. Payment of Securities. The Company shall promptly pay the ---------------------- principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or a Paying Agent holds at the Corporate Trust Office in accordance with this Indenture money suf ficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture. 28 The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. Commission Reports. So long as any Securities are ------------------- outstanding, the Company will file with the Commission and furnish to the Holders of Securities all quarterly and annual financial information required to be contained in a filing with the Commission on Forms 10-Q and 10-K, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual consolidated financial statements only, a report thereon by the Company's independent auditors. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the Commission and provide the Trustee and Holders and prospective Holders (upon request) with such annual reports and such information, documents and other reports as are specified in such Sections and applicable to a U.S. corporation subject to such Sections, such information, documents and other reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections; provided, however, -------- ------- that the Company shall not be required to file any report, document or other information with the Commission if the Commission does not permit such filing. SECTION 4.03. Limitation on Indebtedness. --------------------------- (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness (other than Permitted Indebtedness) unless, after giving pro forma effect to the incurrence of such Indebtedness and the receipt and application of the proceeds thereof, (i) no Default or Event of Default would occur as a consequence of, or be continuing following, such Incurrence and application and (ii) the Consolidated Interest Coverage Ratio would exceed 2.5 to 1.0. (b) "Permitted Indebtedness" means any and all of the following: ---------------------- (i) Indebtedness arising hereunder, including without limitation the Securities and the Subsidiary Guaranties; (ii) Indebtedness under the Senior Credit Facilities, to the extent that the aggregate principal amount of all such Indebtedness under the Senior Credit Facilities (whether incurred pursuant to this clause (ii) or otherwise), together with all Indebtedness Incurred pursuant to clause (ix) of this subsection (b) in respect of Indebtedness previously Incurred pursuant to this clause (ii), at any time outstanding does not exceed the greater of (A) $100.0 million and (B) an amount equal to the sum of (1) $30.0 million and (2) 15% of Adjusted Consolidated Net Tangible Assets determined as of the date of the Incurrence of such Indebtedness; provided, -------- however, that the maximum amount available to be outstanding under the ------- Senior Credit Facilities as Permitted Indebtedness pursuant to this clause (ii) shall be permanently reduced by the amount of Net Available Cash from Asset Sales used to repay Indebtedness under the Senior Credit Facilities, and not subsequently reinvested in Additional Assets or used to permanently reduce other Indebtedness to the extent permitted pursuant to Section 4.06; 29 (iii) Indebtedness to the Company or any of its Wholly Owned Restricted Subsidiaries by any of its Restricted Subsidiaries or Indebtedness of the Company to any of its Wholly Owned Restricted Subsidiaries (but only so long as such Indebtedness is held by the Company or a Wholly Owned Restricted Subsidiary); (iv) Indebtedness in respect of bid, performance or surety obligations issued by or for the account of the Company or any Restricted Subsidiary in the ordinary course of business, including guaranties and letters of credit functioning as or supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed); (v) Indebtedness under Permitted Hedging Agreements; (vi) in-kind obligations relating to oil or gas balancing positions arising in the ordinary course of business that are customary in the Oil and Gas Business; (vii) Indebtedness outstanding on the Issue Date (which is not repaid with the proceeds of the Offering) not otherwise permitted in clauses (i) through (vi) above; (viii) Indebtedness not otherwise permitted to be Incurred pursuant to this subsection (b) (excluding any Indebtedness Incurred pursuant to Section 4.03(a)), provided that the aggregate principal amount -------- of all Indebtedness Incurred pursuant to this clause (viii), together with all Indebtedness Incurred pursuant to clause (ix) of this paragraph in respect of Indebtedness previously Incurred pursuant to this clause (viii), at any one time outstanding does not exceed $10.0 million; (ix) Indebtedness Incurred in exchange for, or the proceeds of which are used to refinance, (A) Indebtedness referred to in clauses (i) through (viii) of this subsection (b) (including Indebtedness previously Incurred pursuant to this clause (ix)) and (B) Indebtedness Incurred pursuant to Section 4.03(a); provided that such Indebtedness is Permitted Refinancing Indebtedness; and (x) Indebtedness consisting of obligations in respect of purchase price adjustments, indemnities or Guaranties in connection with the acquisition or disposition of assets. SECTION 4.04. Limitation on Restricted Payments. ---------------------------------- (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, make any Restricted Payment if, at the time of and after giving effect to the proposed Restricted Payment (i) any Default or Event of Default would have occurred and be continuing, (ii) the Company could not incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03 or (iii) the aggregate amount expended or declared for all Restricted Payments from the Issue Date would exceed the sum (without duplication) of the following: 30 (A) 50% of the aggregate Consolidated Net Income of the Company accrued on a cumulative basis commencing on the last day of the fiscal quarter immediately preceding the Issue Date, and ending on the last day of the fiscal quarter ending on or immediately preceding the date of such proposed Restricted Payment (or, if such aggregate Consolidated Net Income shall be a loss, minus 100 percent of such loss), plus (B) the aggregate net cash proceeds, or the Fair Market Value of Property other than cash, received by the Company on or after the Issue Date from the issuance or sale (other than to a Subsidiary of the Company) of Capital Stock of the Company or any options, warrants or rights to purchase Capital Stock of the Company, plus (C) the aggregate net cash proceeds or the Fair Market Value of Property other than cash received by the Company as capital contributions to the Company (other than from a Subsidiary of the Company) on or after the Issue Date, plus (D) the aggregate net cash proceeds received by the Company upon the exercise of any options, warrants or rights to purchase shares of Capital Stock of the Company (other than from a Subsidiary of the Company) on or after the Issue Date, plus (E) the aggregate net cash proceeds received on or after the Issue Date by the Company from the issuance or sale (other than to any Subsidiary of the Company) of convertible debt or convertible Redeemable Stock that has been converted into or exchanged for Capital Stock of the Company, together with the aggregate cash received by the Company at the time of such conversion or exchange, plus (F) to the extent not otherwise included in the Company's Consolidated Net Income, an amount equal to the net reduction in Investments made by the Company and its Restricted Subsidiaries subsequent to the Issue Date in any Person resulting from (1) payments of interest on debt, dividends, repayments of loans or advances or other transfers or distributions of Property, in each case to the Company or any Restricted Subsidiary from any Person other than the Company or a Restricted Subsidiary, and in an amount not to exceed the book value of Investments previously made in such Person that were treated as Restricted Payments, or (2) the designation of any Unrestricted Subsidiary as a Restricted Subsidiary, and in an amount not to exceed the lesser of (x) the book value of all Investments previously made in such Unrestricted Subsidiary that were treated as Restricted Payments and (y) the Fair Market Value of such Unrestricted Subsidiary, plus (G) $10.0 million. (b) The limitations set forth in Section 4.04 (a) will not prevent the Company or any Restricted Subsidiary from making the following Restricted Payments so long as, at the time thereof, no Default or Event of Default shall have occurred and be continuing (except in the case of clause (i) below under which the payment of a dividend is permitted, so long as the declaration of such dividend was made in compliance with Section 4.04(a)): 31 (i) the payment of any dividend on Capital Stock of the Company or any Restricted Subsidiary within 60 days after the declaration thereof, if at such declaration date such dividend could have been paid in compliance with Section 4.04 (a); (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company or any Restricted Subsidiary, in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary of the Company) of Capital Stock of the Company; (iii) the making of any principal payment on or the repurchase, redemption, defeasance or other acquisition or retirement for value, prior to any scheduled principal payment, scheduled sinking fund payment or maturity, of any Pari Passu Indebtedness or Subordinated Indebtedness (other than Redeemable Stock) in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent issuance and sale (other than to a Subsidiary of the Company) of Capital Stock of the Company; (iv) the making of any principal payment on or the repurchase, redemption, defeasance or other acquisition or retirement for value of Pari Passu Indebtedness or Subordinated Indebtedness in exchange for, or out of the aggregate net cash proceeds of, a substantially concurrent Incurrence (other than a sale to a Subsidiary of the Company) of Pari Passu Indebtedness or Subordinated Indebtedness so long as such new Indebtedness is Permitted Refinancing Indebtedness and such new Indebtedness (A) has an Average Life to Stated Maturity that is longer than the Average Life to Stated Maturity of the Notes and (B) has a Stated Maturity for its final scheduled principal payment that is at least 91 days later than the Stated Maturity of the final scheduled principal payment of the Notes; and (v) loans made to officers, directors or employees of the Company or any Restricted Subsidiary approved by the Board of Directors (or a duly authorized officer), the proceeds of which are used (A) to purchase common stock of the Company in connection with a restricted stock or employee stock purchase plan, or to exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options or (B) to refinance loans, together with accrued interest thereon, made pursuant to item (A) of this clause (v). The actions described in clauses (i), (ii), (iii) and (v) of this Section 4.04(b) shall be Restricted Payments that shall be permitted to be taken in accordance with this Section 4.04(b) but shall reduce the amount that would otherwise be available for Restricted Payments under Section 4.04(a) (provided that any dividend paid pursuant to clause (i) of this Section 4.04(b) shall reduce the amount that would otherwise be available under paragraph (a) when declared, but not also when subsequently paid pursuant to such clause (i)), and the actions described in clause (iv) of this Section 4.04(b) shall be Restricted Payments that shall be permitted to be taken in accordance with this Section 4.04(b) but shall not reduce the amount that would otherwise be available for Restricted Payments under Section 4.04(a). 32 SECTION 4.05. Limitation on Restrictions on Distributions from Restricted ----------------------------------------------------------- Subsidiaries. The Company will not, and will not permit any of its Restricted - ------------- Subsidiaries to, directly or indirectly, create, assume, or otherwise cause or suffer to exist or become effective, or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction on the legal right of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock or Redeemable Stock held by the Company or a Subsidiary Guarantor, (b) pay any Indebtedness or other obligation owed to the Company or any Subsidiary Guarantor, (c) make any Investments in the Company or any Subsidiary Guarantor, or (d) transfer any of its property or assets to the Company or any Subsidiary Guarantor. Such limitation will not apply (i) with respect to clauses (c) and (d) only, to encumbrances and restrictions (A) in existence under or by reason of any agreements in effect on the Issue Date, (B) required under Senior Credit Facilities that are not more restrictive than those in effect under the Senior Credit Facilities on the Issue Date, (C) in existence with respect to a Restricted Subsidiary at the time it became a Restricted Subsidiary if (1) such encumbrance or restriction was not created in anticipation of or in connection with the transactions pursuant to which the Restricted Subsidiary become a Restricted Subsidiary and (2) immediately following such transaction, on a pro forma basis, the Company could incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03, or (D) which result from the renewal, refinancing, extension, or amendment of an agreement referred to in the immediately preceding clauses (a), (b) and (c), provided, -------- such replacement or encumbrance or restriction is no more restrictive to the Company or Restricted Subsidiary and is not materially less favorable to the Holders of Notes than those under or pursuant to the agreement evidencing the Indebtedness so extended, renewed, refinanced or replaced, and (ii) with respect to clause (d) only, to (A) any restriction on the sale, transfer or other disposition of assets or Property securing Indebtedness as a result of a Lien permitted under Section 4.10, (B) any encumbrance or restriction arising in connection with an acquisition of Property, so long as such encumbrance or restriction relates solely to the Property so acquired (including future improvements thereon, accessions thereto and proceeds thereof) and was not created in anticipation of or in connection with such acquisition, (C) customary provisions restricting subletting or assignment of leases and customary provisions in other agreements that restrict assignment of such agreements or rights thereunder, (D) any encumbrance or restriction due to applicable law, (E) customary restrictions contained in asset sale agreements limiting the transfer of such assets pending the closing of such sale and (F) restrictions contained in purchase money obligations for Property acquired in the ordinary course of business with respect to transfers of such Property. SECTION 4.06. Limitation on Asset Sales. -------------------------- (a) The Company will not, and will not permit any Restricted Subsidiary to, consummate any Asset Sale unless (i) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the shares and assets subject to such Asset Sale and (ii) all of the consideration paid to the Company or such Restricted Subsidiary in connection with such Asset Sale is in the form of cash, cash equivalents, Liquid Securities, Exchanged Properties or the assumption by the purchaser of liabilities of the Company (other than liabilities of the Company that are by their terms subordinated to the Securities), liabilities of any Subsidiary Guarantor that made such Asset Sale (other than liabilities of a Subsidiary Guarantor that are by their terms subordinated to such Subsidiary Guarantor's 33 Subsidiary Guaranty) or liabilities of any Restricted Subsidiary that made such Asset Sale and which is not a Subsidiary Guarantor, in each case as a result of which the Company and its remaining Restricted Subsidiaries are no longer liable ("Permitted Consideration"); provided, however, that the Company and its -------- ------- Restricted Subsidiaries shall be permitted to receive Property other than Permitted Consideration, so long as the aggregate Fair Market Value of all such Property other than Permitted Consideration received from Asset Sales and held by the Company or any Restricted Subsidiary at any one time shall not exceed 7.5% of Adjusted Consolidated Net Tangible Assets. (b) The Net Available Cash from Asset Sales by the Company or a Restricted Subsidiary may be applied by the Company or such Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness of the Company or Indebtedness of such Restricted Subsidiary), to (i) prepay, repay or purchase Senior Indebtedness of the Company or a Subsidiary Guarantor or Indebtedness of such Restricted Subsidiary (in each case excluding Indebtedness owed to the Company or an Affiliate of the Company); (ii) reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary); or (iii) purchase Securities or purchase both Securities and one or more series or issues of other Pari Passu Indebtedness on a pro rata basis excluding Securities owned by the Company or an Affiliate of the Company. (c) Any Net Available Cash from an Asset Sale not applied in accordance with Section 4.06(b) within 365 days from the date of such Asset Sale shall constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to purchase Securities having an aggregate principal amount equal to the aggregate amount of Excess Proceeds (the "Prepayment Offer") at a purchase price equal to 100% of ---------------- the principal amount of such Securities plus accrued and unpaid interest, if any, to the Purchase Date (as hereinafter defined) (the "Prepayment Offer ---------------- Payment") in accordance with the procedures (including prorating in the event of - ------- oversubscription) set forth herein, but, if the terms of any Pari Passu Indebtedness require that a Pari Passu Offer be made contemporaneously with the Prepayment Offer, then the Excess Proceeds shall be prorated between the Prepayment Offer and such Pari Passu Offer in accordance with the aggregate outstanding principal amounts of the Securities and such Pari Passu Indebtedness, and the aggregate principal amount of Securities for which the Prepayment Offer is made shall be reduced accordingly. If the aggregate principal amount of Securities tendered by Holders thereof exceeds the amount of available Excess Proceeds, then such Excess Proceeds will be allocated pro rata according to the principal amount of the Securities tendered and the Trustee will select the Securities to be purchased by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. To the extent that any portion of the amount of Excess Proceeds remains after compliance with the second sentence of this subsection and provided that all Holders of Securities have been given the opportunity to tender their Securities for purchase as described in the following subsection in accordance with this Indenture, the Company or such Restricted Subsidiary may use such remaining amount for general corporate purposes otherwise permitted under this Indenture and the amount of Excess Proceeds will be reset to zero. 34 (d) Within five days after the 365th day following the date of an Asset Sale, the Company shall, if it is obligated to make an offer to purchase the Securities pursuant to Section 4.06(c), send a written Prepayment Offer notice, by first-class mail, to the Holders of the Securities (the "Prepayment ---------- Offer Notice"), accompanied by such information regarding the Company and its - ------------ Subsidiaries as the Company in good faith believes will enable such Holders of the Securities to make an informed decision with respect to the Prepayment Offer. The Prepayment Offer Notice will state, among other things, (i) that the Company is offering to purchase Securities pursuant to the provisions of Section 4.06 of this Indenture, (ii) that any Security (or any portion thereof) accepted for payment (and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to accrue interest on the Purchase Date, (iii) that any Securities (or portions thereof) not properly tendered will continue to accrue interest, (iv) the purchase price and purchase date, which shall be, subject to any contrary requirements of applicable law, no less than 30 days nor more than 60 days after the date the Prepayment Offer Notice is mailed (the "Purchase -------- Date"), (v) the aggregate principal amount of Securities to be purchased, (vi) a description of the procedure which Holders of Securities must follow in order to tender their Securities and the procedures that Holders of Securities must follow in order to withdraw an election to tender their Securities for payment, and (vii) all other instructions and materials necessary to enable Holders to tender Securities pursuant to the Prepayment Offer. (e) On the Purchase Date, the Company will (i) accept for payment Securities or portions thereof properly tendered pursuant to the Prepayment Offer, (ii) deposit with the Paying Agent in immediately available funds an amount equal to the Prepayment Offer Payment in respect of Securities or portions thereof so tendered and (iii) deliver, or cause to be delivered, to the Trustee the Securities so accepted together with an Officer's Certificate listing the Securities or portions thereof tendered to the Company and accepted for payment. The Paying Agent shall promptly mail to each holder of Securities so accepted payment in an amount equal to the Prepayment Offer Payment for such Securities and the Trustee shall, upon receipt of a written order in the form of an Officer's Certificate, promptly authenticate and mail to each holder a new Securities in a principal amount equal to any unpurchased portion of the Securities surrendered, if any; provided, that each such new Security shall be -------- in a principal amount of $1,000 or any integral multiple thereof. The Company will announce publicly the results of a Prepayment Offer on or as soon as practicable after the Purchase Date. (f) The Company will comply, to the extent applicable, with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act and any other securities laws or regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Securities as described above. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Prepayment Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described above by virtue thereof. SECTION 4.07. Limitation on Transactions with Affiliates. ------------------------------------------- (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, conduct any business or enter into any transaction or series of transactions (including, but not limited to, the sale, transfer, disposition, purchase, exchange or lease of Property, 35 the making of any Investment, the giving of any Guarantee or the rendering of any service) with or for the benefit of any Affiliate of the Company (other than the Company or a Wholly Owned Restricted Subsidiary), unless (i) such transaction or series of transactions is on terms no less favorable to the Company or such Restricted Subsidiary that those that could be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate of the Company or such Restricted Subsidiary, and (ii) with respect to a transaction or series of transactions involving aggregate payments by or to the Company or such Restricted Subsidiary having a Fair Market Value equal to or in excess of (A) $1.0 million but less than $5.0 million, an officer of the Company, in his good faith judgment, believes such transaction or series of transactions complies with clause (i) of this paragraph as evidenced by an Officer's Certificate delivered to the Trustee, (B) $5.0 million but less than $15.0 million, the Board of Directors of the Company (including a majority of the disinterested members of the Board of Directors of the Company) approves such transaction or series of transactions and, in its good faith judgment, believes that such transaction or series of transactions complies with clause (i) of this paragraph as evidenced by a certified resolution delivered to the Trustee or (C) $15.0 million, (1) the Company receives from an independent, nationally recognized investment banking firm or appraisal firm, in either case specializing or having a speciality in the type and subject matter of the transaction (or series of transactions) at issue, a written opinion that such transaction (or series of transaction) is fair, from a financial point of view, to the Company or such Restricted Subsidiary and (2) the Board of Directors of the Company (including a majority of the disinterested members of the Board of Directors of the Company) approves such transaction or series of transactions and, in its good faith judgment, believes that such transaction or series of transactions complies with clause (i) of this paragraph, as evidenced by a certified resolution delivered to the Trustee. (b) The limitations of the preceding subsection do not apply to: (i) the payment of reasonable and customary regular fees to directors of the Company or any of its Restricted Subsidiaries who are not employees of the Company or any of its Restricted Subsidiaries; (ii) indemnities of officers and directors of the Company or any Subsidiary consistent with such Person's bylaws and applicable statutory provisions; (iii) the Company's and its Restricted Subsidiaries' employee compensation and other benefit arrangements; (iv) loans made (A) to officers, directors or employees of the Company or any Restricted Subsidiary approved by the Board of Directors (or by a duly authorized officer), the proceeds of which are used solely to purchase common stock of the Company in connection with a restricted stock or employee stock purchase plan, exercise stock options received pursuant to an employee or director stock option plan or other incentive plan, in a principal amount not to exceed the exercise price of such stock options, or (B) to refinance loans, together with accrued interest thereon, made pursuant to this clause (iv); 36 (v) advances and loans to officers, directors and employees of the Company or any Subsidiary in the ordinary course of business, provided -------- such loans and advances do not exceed $2.0 million at any one time outstanding; or (vi) Investments in Unrestricted Subsidiaries which are deemed to be Restricted Payments under Section 4.04. SECTION 4.08. Limitation on Issuance and Sale of Capital Stock of --------------------------------------------------- Restricted Subsidiaries. The Company will not (a) permit any Restricted - ------------------------ Subsidiary to sell or otherwise issue any Capital Stock other than to the Company or one of its Wholly Owned Restricted Subsidiaries or (b) permit any Person other than the Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any other Restricted Subsidiary except, in each case, for (i) directors' qualifying shares, (ii) the Capital Stock of a Restricted Subsidiary owned by a Person at the time such Restricted Subsidiary became a Restricted Subsidiary or acquired by such Person in connection with the formation of the Restricted Subsidiary, or transfers thereof or (iii) a sale of all of the Capital Stock of a Restricted Subsidiary owned by the Company or its Subsidiaries effected in accordance with Section 4.06, or (d) any sale or issuance of Capital Stock of a Foreign Subsidiary that is required to be issued to or owned by the government of a foreign jurisdiction or individual or corporate citizens of such foreign jurisdiction in order for such Foreign Subsidiary to transact business in such foreign jurisdiction, provided, that any -------- such sale or issuance shall be deemed to be an Asset Sale to the extent the percentage of the total outstanding Voting Stock of such Foreign Subsidiary owned directly and indirectly by the Company is reduced as a result of such sale or issuance and any such sale or issuance must be made in compliance with the provisions of Section 4.06. SECTION 4.09. Change of Control. ------------------ (a) Upon the occurrence of a Change of Control, each Holder of Securities shall have the right to require the Company to repurchase all or any part (equal to $1,000 in principal amount or an integral multiple thereof) of such Holder's Securities pursuant to the offer described below (the "Change of --------- Control Offer") at a purchase price in cash equal to 101% of the principal - ------------- amount thereof, plus accrued and unpaid interest, if any, thereon to the purchase date (the "Change of Control Payment"). ------------------------- (b) Within 30 days following any Change of Control, the Company shall mail a notice to each Holder stating, among other things: (i) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to this Indenture and that all Securities (or portions thereof) properly tendered will be accepted for payment; (ii) the purchase price and the purchase date, which shall be, subject to any contrary requirements of applicable law, no fewer than 30 days nor more than 60 days from the date the Company notifies the Holders of the occurrence of the Change of Control (the "Change of Control ----------------- Payment Date"); (iii) that any Security (or portion thereof) accepted for - ------------ payment (and duly paid on the Change of Control Payment Date) pursuant to the Change of Control Offer shall cease to accrue interest on the Change of Control Payment Date; (iv) that any Securities (or portions thereof) not properly tendered will continue to accrue interest; (v) a description of the transaction or transactions constituting the Change of Control; (vi) the procedures that Holders of Securities must follow in order to tender their Securities (or portions thereof) for payment and the procedures that Holders of Securities must follow in order to withdraw 37 an election to tender Securities (or portions thereof) for payment; and (vii) all other instructions and materials necessary to enable Holders to tender Securities pursuant to the Change of Control Offer. (c) On the Change of Control Payment Date, the Company will (i) accept for payment Securities or portions thereof properly tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent in immediately available funds an amount equal to the Change of Control Payment in respect of Securities or portions thereof so tendered and (iii) deliver, or cause to be delivered, to the Trustee the Securities so accepted together with an Officer's Certificate listing the Securities or portions thereof tendered to the Company and accepted for payment. The Paying Agent shall promptly mail to each Holder of Securities so accepted payment in an amount equal to the Change of Control Payment for such Securities and the Trustee shall, upon receipt of a written order in the form of an Officer's Certificate, promptly authenticate and mail to each holder a new Securities in a principal amount equal to any unpurchased portion of the Securities surrendered, if any; provided, that each such new -------- Security shall be in a principal amount of $1,000 or any integral multiple thereof. The Company will announce publicly the results of a Change in Control Offer on or as soon as practicable after the Change of Control Payment Date. (d) The Company will comply, to the extent applicable, with the requirements of Rules 13e-4 and 14e-1 under the Exchange Act, and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Securities in connection with a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions relating to the Change of Control Offer, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations described above by virtue thereof. SECTION 4.10. Limitation on Liens. The Company will not, and will not -------------------- permit any Restricted Subsidiary to, directly or indirectly, enter into, create, incur, assume or suffer to exist any Lien on or with respect to any Property of the Company or such Restricted Subsidiary, whether owned on the Issue Date or acquired after the Issue Date, or any interest therein or any income or profits therefrom, unless the Securities (and, in the case of a Restricted Subsidiary, the Subsidiary Guaranty of such Subsidiary) are secured equally and ratably with (or prior to) any and all other obligations secured by such Lien, except that the Company and its Restricted Subsidiaries may enter into, create, incur, assume or suffer to exist Liens securing Senior Indebtedness, Liens securing Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor and Permitted Liens. SECTION 4.11. Incurrence of Layered Indebtedness. ---------------------------------- (a) The Company will not Incur any Indebtedness which is subordinated or junior in right of payment to any Senior Indebtedness of the Company unless such Indebtedness constitutes Indebtedness which is junior to, or pari passu with, the Securities in right of payment. (b) No Subsidiary Guarantor will Incur any Indebtedness that is subordinated or junior in right of payment to any Senior Indebtedness of such Subsidiary Guarantor unless such Indebtedness constitutes Indebtedness which is junior to, or pari passu with, such Subsidiary Guarantor's Subsidiary Guaranty in right of payment. 38 SECTION 4.12. Restricted and Unrestricted Subsidiaries. Unless defined ---------------------------------------- or designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or any of its Restricted Subsidiaries shall be classified as a Restricted Subsidiary subject to the provisions of the next paragraph. The Company may designate a Subsidiary (including a newly formed or newly acquired Subsidiary) of the Company or any of its Restricted Subsidiaries as an Unrestricted Subsidiary if (a) such Subsidiary does not own at such time any Capital Stock, Redeemable Stock or Indebtedness of, or own or hold any Lien on any property of, the Company or any other Restricted Subsidiary, (b) such Subsidiary does not at such time have any Indebtedness or other obligations which, if in Default, would result (with the passage of time or notice or otherwise) in a default on any Indebtedness of the Company or any Restricted Subsidiary, and (c)(1) such designation is effective immediately upon such Subsidiary becoming a Subsidiary of the Company or of a Restricted Subsidiary, (2) the Subsidiary to be so designated has total assets of $1,000 or less, or (3) if such Subsidiary has assets greater than $1,000, then such redesignation as an Unrestricted Subsidiary is deemed to constitute a Restricted Payment in an amount equal to the Fair Market Value of the Company's direct and indirect ownership interest in such Subsidiary, and such Restricted Payment would be permitted to be made at the time of such designation under Section 4.04. Except as provided in clauses (c)(2) and (3) of this paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. The designation of an Unrestricted Subsidiary or removal of such designation shall be made by the Board of Directors of the Company or a committee thereof pursuant to a certified resolution delivered to the Trustee and shall be effective as of the date specified in the applicable certified resolution, which shall not be prior to the date such certified resolution is delivered to the Trustee. The Company will not, and will not permit any of its Restricted Subsidiaries to, take any action or enter into any transaction or series of transactions that would result in a Person becoming a Restricted Subsidiary (whether through an acquisition or otherwise, but excluding the creation by the Company of a new Wholly Owned Restricted Subsidiary) unless, after giving effect to such action, transaction or series of transactions, on a pro forma basis, (a) the Company could Incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to Section 4.03 and (b) no Default or Event of Default would occur or be continuing. SECTION 4.13 Future Guarantors. The Company shall cause any Restricted ----------------- Subsidiary (other than a Foreign Subsidiary) that becomes a Significant Subsidiary (and any Significant Subsidiary, other than a Foreign Subsidiary, that was previously an Unrestricted Subsidiary and becomes a Restricted Subsidiary) after the Issue Date to execute and deliver to the Trustee a supplemental indenture in the form of Exhibit B hereto pursuant to which such Significant Subsidiary will become a Subsidiary Guarantor and shall Guarantee payment of the Securities as provided in Section 11.07. SECTION 4.14. Maintenance of Office or Agency. The Company shall ------------------------------- maintain in The City of New York, an office or agency (which initially will be an office of the Trustee or an Affiliate of the Trustee) where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or 39 shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee its agent to receive all presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside of The City of New York) where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided that no such designation or rescission -------- shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York, for such purposes. The Company shall give prompt written notice to the Trustee of any such designation and any change in the location of any such other office or agency. SECTION 4.15. Money for the Security Payments to be Held in Trust. If --------------------------------------------------- the Company, any Subsidiary of the Company or any of their respective Affiliates shall at any time act as Paying Agent with respect to the Securities, such Paying Agent shall, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto money sufficient to pay the principal (and premium, if any) or interest so becoming due until such money shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents with respect to the Securities, it shall, prior to or on each due date of the principal of (and premium, if any) or interest on any of the Securities, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Paying Agent shall promptly notify the Trustee of the Company's action or failure so to act. Any funds deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Securities and remaining unclaimed for two years after the date upon which such payment shall have become due, shall be paid to the Company on Order or, if then held by the Company, shall be discharged from such trust; provided, however, that the Company shall cause to be published at least once in - -------- ------- a newspaper of general circulation in The City of New York or mailed to each Holder entitled to such unclaimed funds, notice that such funds remain unclaimed and that, after a date specified therein, which shall be a date not less than 30 days from the date of such publication or mailing, any unclaimed balance of such money remaining as of such date shall be repaid to the Company. After repayment to the Company, Holders entitled to such funds shall look only to the Company for payment without interest thereon, as an unsecured general creditor, and the Trustee and the Paying Agent shall have no further liability with respect to such trust money, and the Company shall not be a trustee in respect of such funds. SECTION 4.16. Payment of Taxes and Other Claims. The Company shall pay --------------------------------- or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any of its Subsidiaries and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law 40 become a Lien upon the property of the Company or any of its Subsidiaries; provided that the Company shall not be required to pay or discharge or cause to - -------- be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP or other appropriate provision has been made. SECTION 4.17. Corporate Existence. The Company will, and will cause each ------------------- of its Significant Subsidiaries to, preserve and keep in full force and effect its corporate existence in accordance with applicable law, except as permitted in Sections 5.01 and 5.02; provided, however, that the Company may terminate the -------- ------- corporate existence of any Significant Subsidiary that is not a Subsidiary Guarantor if, in the good faith judgment of the Board of Directors, such termination is desirable in the conduct of the business of the Company and its Restricted Subsidiaries and is not disadvantageous in any material respect to the Holders. SECTION 4.18. Compliance Certificate. The Company shall deliver to the ----------------------- Trustee within 120 days after the end of each fiscal year of the Company an Officer's Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA (S) 314(a)(4). SECTION 4.19. Further Instruments and Acts. Upon request of the Trustee, ----------------------------- the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.20. Prohibition on Company and Guarantors Becoming Investment --------------------------------------------------------- Companies. None of the Company or the Subsidiary Guarantors shall become an - --------- "investment company" as defined in the Investment Company Act of 1940, as amended. SECTION 4.21. Stay, Extension and Usury Laws. The Company and each of ------------------------------ the Subsidiary Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit of advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. 41 ARTICLE 5 Successor Company ----------------- SECTION 5.01. Merger, Consolidation and Sale of Substantially All Assets. ---------------------------------------------------------- (a) (i) The Company will not merge or consolidate with or into any other Person (whether or not the Company is the surviving entity), and (ii) the Company will not and will not permit its Restricted Subsidiaries to, directly or indirectly, sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all of the Property of the Company and its Restricted Subsidiaries taken as a whole to any Person in any one transaction or a series of transactions (including, without limitation, dispositions pursuant to mergers, consolidations, Investments and Production Payments and Reserve Sales), in each case unless (A) the Surviving Entity shall be a corporation organized and existing under the laws of the United States of America or a State thereof or the District of Columbia, (B) in the case of a transaction described in clause (ii) above, the Property shall have been transferred as an entirety or virtually as an entirety to one Person, (C) immediately before and after giving effect to such transaction or series of transactions on a pro forma basis, no Default or Event of Default shall have occurred and be continuing, (D) except in the case of a merger of the Company with a Restricted Subsidiary, immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Surviving Entity would be able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under Section 4.03, (E) except in the case of a merger of the Company with a Restricted Subsidiary, immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Surviving Entity shall have a Consolidated Net Worth equal to or greater than the Consolidated Net Worth of the Company immediately prior to the transaction or series of transactions, (F) if the Company is not the Surviving Entity, then (1) the Surviving Entity shall have executed and delivered to the Trustee a supplemental indenture satisfactory to the Trustee pursuant to which the Surviving Entity assumes the obligations of the Company under this Indenture and the Securities, (2) each Subsidiary Guarantor (unless it is the Surviving Entity) shall have executed and delivered to the Trustee a supplemental indenture satisfactory to the Trustee confirming that such Subsidiary Guarantor's Subsidiary Guaranty remains in full force and effect and guarantees the Surviving Entity's obligations under this Indenture and the Securities, and (3) in the case of a transaction described in clause (ii) above in which the transferee assumes all of the obligations of the Company under the Indenture and the Securities, the Company shall be released and shall no longer be considered an obligor under this Indenture and the Securities, and (G) the Company and, if the Company is not the Surviving Entity, the Surviving Entity, shall have delivered to the Trustee an Officer's Certificate (attaching the calculations to demonstrate compliance with clauses (D) and (E) above) and an Opinion of Counsel, each stating that such merger, consolidation or disposition and any such supplemental indentures comply with the above provisions. The term "Surviving Entity" shall mean the Person referred to in clauses ---------------- (i) and (ii) above (a) formed by or surviving any such merger or consolidation involving the Company or (b) to which any such sale, transfer, assignment, lease, conveyance or other disposition is made. (b) With respect to each transaction or series of transactions described in subsection (a) above, giving effect to such transaction or series of transactions on a pro forma basis shall include, 42 without limitation, (i) treating any Indebtedness not previously the obligation of the Company or any of its Restricted Subsidiaries which becomes an obligation of the Company or any of its Restricted Subsidiaries in connection with or as a result of such transaction or series of transactions as having been Incurred at the time of such transaction or series of transactions, and (ii) giving effect to any Indebtedness Incurred or anticipated to be Incurred in connection with such transaction or series of transactions. SECTION 5.02. When a Subsidiary Guarantor May Merge or Transfer Assets. --------------------------------------------------------- Each Subsidiary Guarantor may merge or consolidate with or dispose of its assets to the Company or a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor except to the extent any such transaction is limited by Section 5.01. In addition, each Subsidiary Guarantor may merge or consolidate with or dispose of its assets to any Person (other than the Company or a Wholly Owned Restricted Subsidiary that is a Subsidiary Guarantor), regardless of whether such Person is an Affiliate of such Subsidiary Guarantor, if: (i) immediately after such transaction, and giving effect thereto, no Default or Event of Default has occurred and is continuing;(ii) such transaction was subject to, and consummated in compliance with, as appropriate, either Section 4.06 or Section 5.01; and (iii) the Company shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such transaction complies with the above provisions and that all conditions precedent relating to such transaction have been complied with. ARTICLE 6 Defaults and Remedies --------------------- SECTION 6.01. Events of Default. Whenever used herein, an "Event of ------------------ -------- Default" means any one of the following events (whatever the reason for such - ------- Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) the Company shall fail to make any payment of interest on the Securities within 30 days after any such amount becomes due in accordance with the terms thereof; (b) the Company shall fail to make any payment of principal of (or premium, if any, on) the Securities when due in accordance with the terms thereof, whether upon maturity, acceleration, call for redemption, call for purchase under Section 4.06 or Section 4.09 or otherwise; (c) the Company or any Subsidiary Guarantor shall fail to observe or perform any other covenant or agreement contained in the Securities or this Indenture and such failure continues for a period of 60 days after written notice of such failure has been sent to the Company by the Trustee specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default"; - ------------------ (d) the occurrence and continuation beyond any applicable grace period of any default in the payment of the principal of (or premium, if any, on) or interest on any Indebtedness of the Company (other than the Securities) or any Restricted Subsidiary for money borrowed when 43 due (whether resulting from maturity, acceleration, mandatory redemption or otherwise), or any other default causing acceleration of any Indebtedness of the Company or any Restricted Subsidiary for money borrowed, provided that the -------- aggregate principal amount of such Indebtedness shall exceed $5.0 million; (e) one or more final judgments or orders by a court of competent jurisdiction are entered against the Company or any Restricted Subsidiary in an uninsured or unindemnified aggregate amount outstanding at any time in excess of $5.0 million and such judgments or orders are not discharged, waived, stayed, satisfied or bonded for a period of 60 consecutive days; (f) the Company or any Material Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or files a request or petition for a writ of execution to initiate bankruptcy proceedings or have itself adjudicated as bankrupt; (ii) consents to the entry of an order for relief against it in an involuntary case; (iii) consents to the appointment of a Custodian of it or for any substantial part of its property; (iv) makes a general assignment for the benefit of its creditors; or (v) proposes or agrees to an accord or composition in bankruptcy between itself and its creditors; (g) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any Material Restricted Subsidiary in an involuntary case; (ii) appoints a Custodian of the Company or any Material Restricted Subsidiary or for any substantial part of the property of the Company or any Material Restricted Subsidiary; (iii) orders the winding up or liquidation of the Company or any Material Restricted Subsidiary; (iv) adjudicates the Company or a Material Restricted Subsidiary as bankrupt or insolvent; or (v) ratifies an accord or composition in bankruptcy between the Company or a Material Restricted Subsidiary and the respective creditors thereof; 44 and the order or decree remains unstayed and in effect for 60 days; or (h) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of this Indenture and such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty. SECTION 6.02. Acceleration. If an Event of Default (other than an Event ------------- of Default described in clause (f) or (g) above) with respect to the Securities at the time outstanding shall occur and be continuing, either the Trustee or the Holders of at least 25% in aggregate principal amount of the outstanding Securities by written notice may declare the principal amount of the Securities to be due and payable immediately. If an Event of Default described in clause (f) or (g) above with respect to the Securities at the time outstanding shall occur, the principal amount of all the Securities will automatically, and without any action by the Trustee or any Holder, become immediately due and payable. After any such acceleration, but before a judgment or decree based on acceleration, the Holders of at least a majority in aggregate principal amount of the outstanding Securities may rescind and annul such acceleration if (a) the Company or any Subsidiary Guarantor has paid or deposited with the Trustee a sum sufficient to pay (i) all money paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursement and advances of the Trustee, its agents and counsel; (ii) all overdue installments of interest on all Securities; (iii) the principal of (and premium, if any, on ) any Securities that have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in the Securities; and (iv) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate prescribed therefor in the Securities; (b) all Events of Default, other than the nonpayment of principal of Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 6.04; (c) the annulment of such acceleration would not conflict with any judgment or decree of a court of competent jurisdiction; and (d) the Company has delivered an Officer's Certificate to the Trustee to the effect of clauses (b) and (c) of this sentence. No such rescission shall affect any subsequent Default or impair any right consequent thereto. 45 SECTION 6.03. Other Remedies. If an Event of Default occurs and is --------------- continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of at least a ------------------------ majority in principal amount of the Securities by notice to the Trustee may waive any past Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Holder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of at least a majority in -------------------- principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Securities. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Holders or may involve the Trustee in personal liability, it being understood that the Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly prejudiced to such Holders, or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed -------- ------- proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. No Holder of any Securities shall -------------------- have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or a trustee, or for any other remedy hereunder, unless: (i) such Holder has previously given to the Trustee written notice of a continuing Event of Default with respect to the Securities; (ii) the Holders of at least 25% in aggregate principal amount of the outstanding Securities have made written request, and such Holder or Holders have offered reasonable indemnity, to the Trustee to institute such proceeding as trustee; and (iii) the Trustee has failed to institute such proceeding, and has not received from the Holders of a majority in aggregate principal amount of the outstanding Securities a direction inconsistent with such request, within 60 days after such notice, request and offer. 46 A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any ------------------------------------- other provision of this Indenture (but subject to Articles 10 and 12 hereof), the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such pay ment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default --------------------------- specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file --------------------------------- such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property ----------- pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company or the Subsidiary Guarantors to the extent required by Article 10 or Article 12; THIRD: to Holders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid. 47 SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of ---------------------- any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. ARTICLE 7 Trustee ------- SECTION 7.01. Duties of Trustee. ------------------ (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform, on their face, to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (1) this subsection does not limit the effect of subsection (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. 48 (d) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (f) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (g) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the Trust Indenture Act. SECTION 7.02. Rights of Trustee. ------------------ (a) The Trustee may conclusively rely on any document believed by it to be genu ine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officer's Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officer's Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute -------- ------- willful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) Prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, Officer's Certificate, or other certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, coupon, security, or other paper or document unless requested in writing to do so by the Holders of not less than a majority in aggregate principal amount of the Securities then outstanding; provided, that if the payment within -------- a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the 49 Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expenses or liabilities as a condition to proceeding; the reasonable expenses of every such examination shall be paid by the Company or, if advanced by the Trustee, shall be repaid by the Company upon demand. (g) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. (h) The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenants, conditions, or agreements on the part of the Company, except as otherwise set forth herein, but the Trustee may require of the Company full information and advice as to the performance of the covenants, conditions and agreements contained herein and shall be entitled in connection herewith to examine the books, records and premises of the Company. (i) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company or any Subsidiary Guarantor shall be sufficient if signed by an officer of the Company or such Subsidiary Guarantor. (j) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty. (j) Except for (i) a default under Section 6.01(a) or (b) hereof, or (ii) any other event of which the Trustee has "actual knowledge" and which event, with the giving of notice or the passage of time or both, would constitute an Event of Default under this Indenture, the Trustee shall not be deemed to have notice of any Default or Event of Default unless specifically notified in writing of such event by the Company or the Holders of not less than 25% in aggregate principal amount of the Securities then outstanding; as used herein, the term "actual knowledge" means the actual fact or statement of knowing, without any duty to make any investigation with regard thereto. SECTION 7.03. Individual Rights of Trustee. The Trustee in its ----------------------------- individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible --------------------- for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is continuing ------------------- and if it is actually known to the Trustee, the Trustee shall mail to each Holder notice of the Default within 90 days after it occurs. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the 50 Trustee may withhold the notice if and so long as the Trustee in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable ------------------------------ after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Holder a brief report dated as of such date that complies with TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b) and 313(c). A copy of each report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the --------------------------- Trustee promptly upon request from time to time the compensation for its services as agreed to by the Trustee and the Company. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or reasonable expense (including reasonable attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim, if notified thereof, and the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own willful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Trustee without the Company's consent, such consent not to be unreasonably withheld or delayed. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture and any resignation or removal of the Trustee. When the Trustee incurs expenses or renders services after the occurrence of a Default specified in Section 6.01(f) or (g) with respect to the Company, the fees and expenses are intended to constitute expenses of administration under the Bankruptcy Law and shall be preferred over the status of the Holders in a proceeding under any Bankruptcy Law. 51 SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time ----------------------- by so notifying the Company. The Holders of at least a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of at least a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of at least 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates ---------------------------- with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case 52 at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all ------------------------------ times satisfy the requirements of TIA Section 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b); provided, however, that there shall be excluded from the -------- ------- operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The -------------------------------------------------- Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 Discharge of Indenture; Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities. ------------------------------------- (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.06) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits in trust with the Trustee for the benefit of the Holders, money, U.S. Government Obligations or a combination thereof, which through the payment of principal, premium, if any, and interest in respect thereof in accordance with their terms will provide money in an amount sufficient to pay the principal of and any premium and interest on the Securities at Stated Maturity or an earlier redemption in accordance with the terms hereof and the Securities, then this Indenture shall, subject to Section 8.01(b), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officer's Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Notwithstanding subsection (a) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.05, 8.06 and 8.07 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. 53 SECTION 8.02. Defeasance. ---------- (a) Subject to Sections 8.02(d) and 8.03, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.16, 5.01(a)(D), 5.01(a)(E), 5.02 and the operation of Sections 6.01(d), 6.01(e), 6.01(f) and 6.01(g) (but, in the case of Sections 6.01(f) and (g), with respect only to Significant Subsidiaries) ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. (b) If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(d), 6.01(e), 6.01(f) and 6.01(g) (but, in the case of Sections 6.01(f) and (g), with respect only to Significant Subsidiaries). If the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor shall be released from all its obligations under its Subsidiary Guaranty. (c) Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (d) Notwithstanding subsection (a) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 7.07, 7.08, 8.05, 8.06 and 8.07 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. SECTION 8.03. Conditions to Defeasance. The Company may exercise its ------------------------ legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee cash in U.S. dollars, U.S. Government Obligations or a combination thereof for the payment of principal of, interest on and premium, if any, on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal, premium and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Sections 6.01(f) or (g) with respect to the Company occurs which is continuing at the end of the period; 54 (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute a regulated investment company under the Investment Company Act of 1940 unless such trust is qualified thereunder or exempt from regulation thereunder; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Securities will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, defeasance or discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance or discharge had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize gain or loss for federal income tax purposes as a result of such deposit and cove nant defeasance and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.04. Application of Trust Money. The Trustee shall hold in --------------------------- trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal, premium and interest on the Securities. SECTION 8.05. Repayment to Company. The Trustee and the Paying Agent --------------------- shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon Order any money held by them for the payment of principal of, premium, if any, or interest on any Securities that remains unclaimed for two years after the date upon which such payment shall have become due; provided, however, that the Company shall cause to be published -------- ------- at least once in a newspaper of general circulation in The City of New York or mailed to each Holder entitled to such unclaimed funds, notice that such funds remain unclaimed and that, after 55 a date specified therein, which shall be a date not less than 30 days from the date of such publication or mailing, any unclaimed balance of such money remaining as of such date shall be repaid to the Company. After repayment to the Company, Holders entitled to such funds shall look only to the Company for payment without interest thereon, as an unsecured general creditor, and the Trustee and the Paying Agent shall have no further liability with respect to such money. SECTION 8.06. Indemnity for Government Obligations. The Company shall ------------------------------------- pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.07. Reinstatement. If the Trustee or Paying Agent is unable to -------------- apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities and the obligations of each Subsidiary Guarantor under its Subsidiary Guaranty shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the Company has made any -------- ------- payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments ---------- SECTION 9.01. Without Consent of Holders. -------------------------- (a) The Company, the Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Holder: (i) to cure any ambiguity, omission, defect or inconsistency; (ii) to provide for the assumption of the obligations of the Company under this Indenture upon the merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole and certain other events specified in Section 5.01; (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities; (iv) to comply with any requirement of the Commission in order to effect or maintain the qualification of this Indenture under the TIA; 56 (v) to make any change that does not adversely affect the rights of any Holder of Securities in any material respect; (vi) to add or remove Subsidiary Guarantors pursuant to the procedures set forth in this Indenture; and (vii) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company. In making any such amendment, the Trustee may (but shall have no obligation to) consult with the original purchasers of the Securities to determine their intentions with respect to the terms hereof. (b) An amendment under this Section may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness of the Company or any Subsidiary Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change in writing. (c) After an amendment under this Section becomes effective, the Company shall mail to Holders (or file with the Commission) a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. ------------------------ (a) The Company, the Subsidiary Guarantors and the Trustee, with the written consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Securities, may execute supplemental indentures or amendments adding any provisions to or changing or eliminating any of the provisions of this Indenture or modifying the rights of the Holders of the Securities, except that no such supplemental indenture, amendment or wavier, without the consent of all of the Holders of outstanding Securities, may: (i) reduce the principal amount of Securities whose Holders must consent to an amendment or waiver; (ii) reduce the rate of or change the time for payment of interest on any Securities; (iii) change the currency in which any amount due in respect of the Securities is payable; (iv) reduce the principal of or any premium on or change the Stated Maturity of any Securities or alter the redemption or repurchase provisions with respect thereto; (v) reduce the relative ranking of any Securities; 57 (vi) release any security that may have been granted to the Trustee in respect of the Securities (except as contemplated in the documents under which such security was granted to the Trustee); (vii) make any change in Article 10 or Article 12 that adversely affects the rights of any Holder under Article 10 or Article 12; (viii) impair the right of any Holder to institute suit for enforcement of any payment on or with respect to such Holder's Securities or any Subsidiary Guaranty; or (ix) make any change in Sections 6.04, 6.07 or 9.02. (b) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. (c) An amendment under this Section may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness of the Company or any Subsidiary Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change in writing). (d) After an amendment under this Section becomes effective, the Company shall mail to Holders a notice briefly describing such amendment. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to ------------------------------------ this Indenture or the Securities shall comply with the Trust Indenture Act as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. ---------------------------------------------- (a) A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Holder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. (b) The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding subsection, those Persons who were Holders at such 58 record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than eleven months after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment -------------------------------------- changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any --------------------------- amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate -------------------- of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 Subordination of the Securities ------------------------------- SECTION 10.01. Agreement to Subordinate. ------------------------ The Company covenants and agrees, and each Holder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article (subject to the provisions of Article 8), to the prior payment in full in cash of all existing and future Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness of the Company. The Securities shall in all respects rank subordinate in right of payment to all existing and future Senior Indebtedness of the Company, pari passu with any future Pari Passu Indebtedness of the Company and senior to any future Subordinated Indebtedness of the Company. All provisions of this Article shall be subject to Section 10.12. 59 SECTION 10.02. Liquidation; Dissolution; Bankruptcy ------------------------------------ Upon any payment or distribution of the assets of the Company upon a total or partial liquidation, dissolution or winding up of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property (each such event, if any, herein sometimes referred to as a "Proceeding"): ---------- (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full in cash of such Senior Indebtedness before Holders are entitled to receive any payment of principal of, or premium, if any, or interest on the Securities; and (2) until the Senior Indebtedness of the Company is paid in full in cash, any distribution made by or on behalf of the Company (and to all debt securities issued in replacement of or exchange for such Senior Indebtedness) to which Holders of Securities would be entitled but for this Article shall be made to holders of Senior Indebtedness of the Company as their interests may appear, except that Holders of Securities may receive and all retain shares of stock and any debt securities that are subordinated to Senior Indebtedness of the Company to at least the same extent as the Securities; provided that no Holder of the Securities shall -------- have the right to receive and retain any such junior securities if the existence of such right would have the effect of causing the Securities to be treated in the same class of claims as the Senior Indebtedness of the Company or any class of claims which is pari passu with such Senior Indebtedness. For purposes of this Section "paid in full" or "payment in full", as used with ------------ --------------- respect to Senior Indebtedness of the Company, means the receipt of cash in payment of the principal amount of such Senior Indebtedness and premium, if any, on and interest thereon (including any interest thereon accruing after the commencement of any Proceeding) to the date of such payment. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the sale, conveyance, assignment, lease or transfer of all or substantially all of its Property or assets to another Person upon the terms and conditions set forth in Article 5 shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or the Person which acquires by sale, conveyance, assignment, lease or transfer such Property or assets, as the case may be, shall, as a part of such consolidation, merger, sale, conveyance, assignment, lease or transfer, comply with the conditions set forth in Article 5. SECTION 10.03. Default on Senior Indebtedness of the Company. --------------------------------------------- The Company may not pay the principal of, premium, if any, on or interest on, the Securities or make any deposit pursuant to Article 8 and may not repurchase, redeem or otherwise retire any Securities (collectively, "pay the ------- Securities") if (a) any principal, premium or interest in respect of any Senior - ---------- Indebtedness of the Company is not paid within any applicable grace period (including at maturity) or (b) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior 60 Indebtedness has been paid in full in cash; provided, however, that the Company -------- ------- may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of each issue of Designated Senior Indebtedness. During the continuance of any default (other than a default described in clause (a), and provided that no acceleration has occurred and is continuing as described in clause (b) of the preceding sentence) with respect to any such Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration), the Company may not pay the Securities for a period (a "Payment ------- Blockage Period") commencing upon the receipt by the Company and the Trustee of - --------------- written notice of such default from the Representative of the holders of any such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period (a "Payment Blockage Notice") and ending 179 days after receipt ----------------------- of such notice by the Company and the Trustee unless earlier terminated (i) by written notice to the Company and the Trustee from the Representative which gave such Payment Blockage Notice, (ii) because such default is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full in cash. Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness and not rescinded such acceleration, the Company may (unless otherwise prohibited pursuant to the first sentence of this Section) resume payments on the Securities after the end of such Payment Blockage Period. No more than one Payment Blockage Notice may be given in any consecutive 360-day period. SECTION 10.04. Acceleration of Payment of Securities. ------------------------------------- If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the Representative of each issue of Designated Senior Indebtedness of the acceleration. The Company may not pay the Securities until five days after such notice is received and, thereafter, may pay the Securities only if this Article otherwise permits the payment at that time. SECTION 10.05. When Distribution Must Be Paid Over. ----------------------------------- If a distribution is made to Holders that because of this Article should not have been made to them, the Holders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. ----------- After all Senior Indebtedness of the Company is paid in full in cash and until the Securities are paid in full, the Holders shall be subrogated to the rights of holders of Senior Indebtedness of the Company to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article to holders of Senior Indebtedness of the Company which otherwise would have been made to Holders is not, as between the Company and the Holders, payment by the Company on such Senior Indebtedness. 61 SECTION 10.07. Relative Rights. --------------- This Article defines the relative rights of Holders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (a) impair, as between the Company and the Holders, the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, on and interest on the Securities in accordance with their terms; or (b) except as set forth in Section 10.04, prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness of the Company to receive payments and distributions otherwise payable to Holders. SECTION 10.08. Subordination May Not Be Impaired by the Company. ------------------------------------------------ No right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. ---------------------------------- Notwithstanding Section 10.03 (but subject to Section 10.05), the Trustee or any Payment Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of any such payment, a Responsible Officer of the Trustee receives written notice reasonably satisfactory to it that payments in respect of the Securities may not be made under this Article. Only the Company, a Representative (satisfactorily identified to the Trustee) or a holder of a class of Senior Indebtedness that has no Representative (satisfactorily identified to the Trustee) may give the notice. Prior to the receipt of such notice, the Trustee and any Paying Agent shall be entitled in all respects to assume that no such facts exist. In any case, the Trustee shall have no responsibility to the holders of Senior Indebtedness of the Company for payments made to Holders by the Company or any Paying Agent unless cash payments are made at the direction of the Trustee more than one Business Day after receipt of such notice referred to above. SECTION 10.10. Distribution of Notice to Representative. ---------------------------------------- Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Trust Moneys Not Subordinated. ----------------------------- Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government obligations held in trust under Article 8 by the Trustee for the payment 62 of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness of the Company or subject to the restrictions set forth in this Article, and none of the Holders or the Trustee shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company or any Representative. SECTION 10.12. Trustee Entitled To Rely. ------------------------ Upon any payment or distribution pursuant to this Article, the Trustee and the Holders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee, receiver, trustee in bankruptcy or agent or other Person making such payment or distribution to the Trustee or to the Holders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company or such holders if there is no Representative with respect to any Senior Indebtedness of the Company, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness of the Company and other Indebtedness, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.02 and 7.03 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article. SECTION 10.13. Trustee To Effectuate Subordination. ----------------------------------- Each Holder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Company as provided in this Article and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.14. Trustee Not Fiduciary for Holders of Senior Indebtedness -------------------------------------------------------- of the Company. - -------------- The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Company and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article or otherwise, except if such mistake was the result of the Trustee's gross negligence or wilful misconduct. With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article Ten and no implied covenants or obligations with respect to holders of Senior Indebtedness of the Company shall be read into this Indenture against the Trustee. 63 SECTION 10.15. Reliance by Holders of Senior Indebtedness of the Company --------------------------------------------------------- on Subordination Provisions. - --------------------------- Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 10.16. Proofs of Claim. --------------- In the event that the Company is subject to any proceeding under any bankruptcy, insolvency or analogous laws and the Holders and the Trustee fail to file any proof of claim permitted to be filed in such proceeding with respect to the Securities, then any Representative of Senior Indebtedness of the Company or any holder thereof if there is no Representative therefor may file such proof of claim no earlier than the later of (i) the expiration of 15 days after such Representative notified the Trustee and the Company of its intention to do so and (ii) 30 days preceding the last day it is permitted to file such claim. SECTION 10.17. Rights of Trustee as Holder of Senior Indebtedness of the --------------------------------------------------------- Company; Preservation of Trustee's Rights. - ----------------------------------------- The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Company, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.18. Article Applicable to Paying Agents. ----------------------------------- In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as ------- used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that neither Section 10.09 nor Section 10.12 shall apply to the Company or any Wholly Owned Subsidiary if it or such Wholly owned Subsidiary acts as Paying Agent. SECTION 10.19. Liquidation, Dissolution and Bankruptcy --------------------------------------- To the extent any payment of Senior Indebtedness of the Company (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is 64 declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Indebtedness of the Company or part thereof originally intended to be satisfied shall for purposes of this Article 10 be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Indebtedness of the Company is declared to be fraudulent, invalid or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligation so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been so affected) for purposes of this Article 10 shall be deemed to be reinstated and outstanding as Senior Indebtedness of the Company as if such declaration, invalidity or setting aside had not occurred. ARTICLE 11 Subsidiary Guaranties --------------------- SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby ---------- unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of, premium, if any, and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each Subsidiary Guarantor further agrees that the ----------- Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under this Article 11 notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise, (b) any extension or renewal of any thereof, (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement, (d) the release of any security held by any Holder or the Trustee for the Obligations of any of them, (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations, or (f) any change in the ownership of such Subsidiary Guarantor. Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein constitutes a guarantee of payment, performance and compliance when due (and not a guarantee of collection) and 65 waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Each Subsidiary Guaranty is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty and each Subsidiary Guaranty is made subject to such provisions of this Indenture. Except as expressly set forth in Sections 8.02, 9.01, 9.02, 11.02 and 11.06, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of, premium, if any, or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of, premium, if any, or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article 12. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations guaranteed hereby may be accelerated as provided in Article 6 for the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such Obligations as provided in Article 6, such 66 Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section. Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 11.02. Limitation on Liability. Any term or provision of this ----------------------- Indenture to the contrary notwithstanding, the maximum aggregate amount of the Obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. To effectuate the foregoing intention, the obligations of each Subsidiary Guarantor shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Subsidiary Guaranty or pursuant to its contribution obligations hereunder, result in the obligations of such Subsidiary Guarantor under its Subsidiary Guaranty not constituting a fraudulent conveyance or fraudulent transfer under federal, state or foreign law, and for purposes of such laws, any Senior Indebtedness of a Subsidiary Guarantor that is incurred from time to time shall be deemed to have been incurred prior to the incurrence by such Subsidiary Guarantor of liability under its Subsidiary Guaranty. Each Subsidiary Guarantor that makes a payment or distribution under a Subsidiary Guaranty shall be entitled to a contribution from each other Subsidiary Guarantor in a pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor. SECTION 11.03. Successors and Assigns. This Article 11 shall be binding ---------------------- upon each Subsidiary Guarantor and its successors and assigns and shall inure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part of --------- either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of any ------------ provision of this Article 11, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances. 67 SECTION 11.06. Release of Subsidiary Guarantor. Any Subsidiary Guarantor ------------------------------- that is no longer a Significant Subsidiary may, by execution and delivery to the Trustee of a supplemental indenture satisfactory to the Trustee, be released from its Subsidiary Guaranty and cease to be a Subsidiary Guarantor. Any Subsidiary Guarantor that is designated an Unrestricted Subsidiary in accordance with the terms of this Indenture shall be released from and relieved of its obligations under its Subsidiary Guaranty upon execution and delivery of a supplemental indenture satisfactory to the Trustee. Such supplemental indenture shall be accompanied by an Officer's Certificate and an Opinion of Counsel, each stating that such supplemental indenture and release of the Subsidiary Guaranty complies with the provisions of this Indenture and that all conditions precedent to such supplemental indenture and release of the Subsidiary Guaranty have been complied with. SECTION 11.07. Execution of Supplemental Indenture for Future Subsidiary --------------------------------------------------------- Guarantors. Each Subsidiary which is required to become a Subsidiary Guarantor - ---------- pursuant to Section 4.13 shall, and the Company shall cause each such Subsidiary to, promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit B hereto pursuant to which such Subsidiary shall become a Subsidiary Guarantor under this Article 11 and shall guarantee the Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guaranty of such Subsidiary Guarantor is a legal, valid and binding obligation of such Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms. ARTICLE 12 Subordination of Subsidiary Guaranties -------------------------------------- SECTION 12.01. Agreement to Subordinate. ------------------------ Each Subsidiary Guarantor covenants and agrees, and each Holder by accepting a Security covenants and agrees, that all payments by such Subsidiary Guarantor in respect of its Subsidiary Guarantee are subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full in cash of all existing and future Senior Indebtedness of such Subsidiary Guarantor, and that the subordination is for the benefit of and enforceable by the holders of Senior Indebtedness of such Subsidiary Guarantor. The Subsidiary Guaranty of each Subsidiary Guarantor shall in all respects rank subordinate in right of payment to all existing and future Senior Indebtedness of such Subsidiary Guarantor, pari passu with any future Pari Passu Indebtedness of such Subsidiary Guarantor and senior to any future Subordinated Indebtedness of such Subsidiary Guarantor. All provisions of this Article shall be subject to Section 12.12. 68 SECTION 12.02. Liquidation; Dissolution; Bankruptcy ------------------------------------ Upon any payment or distribution of the assets of a Subsidiary Guarantor upon a total or partial liquidation, dissolution or winding up of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Subsidiary Guarantor or its property (each such event, if any, herein sometimes referred to as a "Proceeding"): ---------- (a) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to receive payment in full in cash of such Senior Indebtedness before Holders are entitled to receive any payment by such Subsidiary Guarantor in respect of its Subsidiary Guaranty; and (b) until all Senior Indebtedness of such Subsidiary Guarantor is paid in full in cash, any distribution made by or on behalf of such Subsidiary Guarantor to which the Holders would be entitled but for this Article shall be made to the holders of Senior Indebtedness of such Subsidiary Guarantor, as their interests may appear, except that Holders of Securities may receive and all retain shares of stock and any debt securities that are subordinated to Senior Indebtedness of the Subsidiary Guarantor (and to all debt securities issued in replacement of or exchange for such Senior Indebtedness) to at least the same extent as the Securities; provided that no Holder of the Securities -------- shall have the right to receive and retain any such junior securities if the existence of such right would have the effect of causing the Securities to be treated in the same class of claims as the Senior Indebtedness of the Subsidiary Guarantor or any class of claims which is pari passu with such Senior Indebtedness. For purposes of this Section "paid in full" or "payment in full", as used with ------------ --------------- respect to Senior Indebtedness of a Subsidiary Guarantor, means the receipt of cash in payment of the principal amount of such Senior Indebtedness and premium, if any, on and interest thereon (including any interest thereon (including any interest thereon accruing after the commencement of any Proceeding) to the date of such payment. The consolidation of a Subsidiary Guarantor with, or the merger of such Subsidiary Guarantor into, another Person or the liquidation or dissolution of such Subsidiary Guarantor following the sale, conveyance, assignment, lease or transfer of all or substantially all of its Property or assets to another Person upon the terms and conditions set forth in Article 5 shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which such Subsidiary Guarantor is merged or the Person which acquires by sale, conveyance, assignment, lease or transfer such Property or assets, as the case may be, shall, as a part of such consolidation, merger, sale, conveyance, assignment, lease or transfer, comply with the conditions set forth in Article 5. SECTION 12.03. Default Senior Indebtedness of a Subsidiary Guarantor. ----------------------------------------------------- A Subsidiary Guarantor may not make any payment in respect of its Subsidiary Guaranty ("make a Guaranty Payment") if (a) any principal, premium or ----------------------- interest in respect of any Senior Indebtedness of the Subsidiary Guarantor is not paid within any applicable grace period (including at maturity) or (b) any other default on Senior Indebtedness of the Subsidiary Guarantor occurs and 69 the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full in cash; provided, however, that such Subsidiary Guarantor may make a -------- ------- Guaranty Payment without regard to the foregoing if such Subsidiary Guarantor and the Trustee receive written notice approving such payment from the Representative of each issue of Designated Senior Indebtedness of such Subsidiary Guarantor. During the continuance of any default (other than a default described in clause (a), and provided that no acceleration has occurred and is continuing as described in clause (b) of the preceding sentence) with respect to any such Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration), such Subsidiary Guarantor may not make a Guaranty Payment for a period (a "Guaranty Payment ---------------- Blockage Period") commencing upon the receipt by such Subsidiary Guarantor and - --------------- the Trustee of written notice of such default from the Representative of the holders of any such Designated Senior Indebtedness of such Subsidiary Guarantor specifying an election to effect a Guaranty Payment Blockage Period (a "Guaranty -------- Payment Blockage Notice") and ending 179 days after receipt of such notice by - ----------------------- such Subsidiary Guarantor and the Trustee unless earlier terminated (i) by written notice to such Subsidiary Guarantor and the Trustee from the Representative which gave such Guaranty Payment Blockage Notice, (ii) because such default is no longer continuing or (iii) because such Designated Senior Indebtedness of such Subsidiary Guarantor has been repaid in full in cash. Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness and not rescinded such acceleration, such Subsidiary Guarantor may (unless otherwise prohibited pursuant to the first sentence of this Section) resume making Guaranty Payments after the end of such Guaranty Payment Blockage Period. No more than one Guaranty Payment Blockage Notice may be given with respect to each Subsidiary Guarantor in any consecutive 360-day period. SECTION 12.04. Acceleration of Payment of Securities. ------------------------------------- If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the Representative of each issue of Designated Senior Indebtedness of the Subsidiary Guarantors of the acceleration. A Subsidiary Guarantor may not make a Guaranty Payment until five days after such notice is received and, thereafter, may make a Guaranty Payment only if this Article otherwise permits the payment at that time. SECTION 12.05. When Guaranty Payment Must Be Paid Over. --------------------------------------- If a Subsidiary Guarantor makes a Guaranty Payment to Holders that because of this Article should not have been made to them, the Holders who receive such Guaranty Payment shall hold it in trust for holders of Senior Indebtedness of the Subsidiary Guarantor and pay it over to them as their interests may appear. SECTION 12.06. Subrogation. ----------- After all Senior Indebtedness of a Subsidiary Guarantor is paid in full in cash and until the Securities are paid in full, the Holders shall be subrogated to the rights of the holders of Senior 70 Indebtedness of such Subsidiary Guarantor to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article to holders of Senior Indebtedness of a Subsidiary Guarantor which otherwise should have been made to Holders is not, as between such Subsidiary Guarantor and the Holders, payment by such Subsidiary Guarantor on such Senior Indebtedness. SECTION 12.07. Relative Rights. --------------- This Article defines the relative rights of Holders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this Indenture shall: (a) impair, as between a Subsidiary Guarantor and the Holders, the obligation of such Subsidiary Guarantor, which is absolute and unconditional, to make any Guaranty Payment in accordance with the terms of its Subsidiary Guaranty; (b) except as set forth in Section 12.04, prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive payments and distributions otherwise payable to Holders. SECTION 12.08. Subordination May Not be Impaired by the Subsidiary --------------------------------------------------- Guarantor. - --------- No right of any holder of Senior Indebtedness of a Subsidiary Guarantor to enforce the subordination of the obligation of such Subsidiary Guarantor pursuant to its Subsidiary Guaranty shall be impaired by any act or failure to act by such Subsidiary Guarantor or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. ---------------------------------- Notwithstanding Section 12.03 (but subject to Section 12.05), the Trustee or any Paying Agent may continue to make Guaranty Payments and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such Guaranty Payment unless, not less than two Business Days prior to the date of any such payment, a Responsible Officer of the Trustee receives written notice reasonably satisfactory to it that Guaranty Payments may not be made under this Article. Only a Subsidiary Guarantor, the Company, a Representative (satisfactorily identified to the Trustee) or a holder of a class of Senior Indebtedness of a Subsidiary Guarantor that has no Representative (satisfactorily identified to the Trustee) may give the notice. Prior to the receipt of such notice, the Trustee and any Paying Agent shall be entitled in all respects to assume that no such facts exist. In any case, the Trustee shall have no responsibility to the holders of Senior Indebtedness of a Subsidiary Guarantor for payments made to Holders by a Subsidiary Guarantor or any Paying Agent unless cash payments are made at the direction of the Trustee more than one Business Day after receipt of such notice referred to above. 71 SECTION 12.10. Distribution of Notice to Representative. ---------------------------------------- Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Subsidiary Guarantors, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. Trust Moneys Not Subordinated. ----------------------------- Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness of the Subsidiary Guarantors or subject to the restrictions set forth in this Article, and none of the Holders or the Trustee shall be obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Subsidiary Guarantors or any other creditor of the Subsidiary Guarantors or any Representative. SECTION 12.12. Trustee Entitled To Rely. ------------------------ Upon any payment or distribution pursuant to this Article, the Trustee and the Holders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee, receiver, trustee in bankruptcy or agent or other Person making such payment or distribution to the Trustee or to the Holders or (iii) upon the Representatives for the holders of Senior Indebtedness of a Subsidiary Guarantor or such holders if there is no Representative with respect to any Senior Indebtedness of a Subsidiary Guarantor, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Indebtedness of a Subsidiary Guarantor and other Indebtedness, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.02 and 7.03 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article. SECTION 12.13. Trustee To Effectuate Subordination. ----------------------------------- Each Holder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Subsidiary Guarantors as provided in this Article and appoints the Trustee as attorney-in-fact for any and all such purposes. 72 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness -------------------------------------------------------- of the Subsidiary Guarantors. - ---------------------------- The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Subsidiary Guarantors and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Subsidiary Guarantors shall be entitled by virtue of this Article or otherwise. With respect to the holders of Senior Indebtedness of the Subsidiary Guarantors, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article and no implied covenants or obligations with respect to holders of Senior Indebtedness of the Subsidiary Guarantors shall be read into this Indenture against the Trustee. SECTION 12.15. Reliance by Holders of Senior Indebtedness of the ------------------------------------------------- Subsidiary Guarantors on Subordination Provisions. - ------------------------------------------------- Each Holder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Subsidiary Guarantors, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. SECTION 12.16. Proofs of Claim. --------------- In the event that a Subsidiary Guarantor is subject to any proceeding under any bankruptcy, insolvency or analogous laws and the Holders and the Trustee fail to file any proof of claim permitted to be filed in such proceeding with respect to the Subsidiary Guaranties, then any Representative of Senior Indebtedness of the Subsidiary Guarantors or any holder thereof if there is no Representative therefor may file such proof of claim no earlier than the later of (i) the expiration of 15 days after such Representative notified the Trustee and the Company of its intention to do so and (ii) 30 days preceding the last day it is permitted to file such claim. SECTION 12.17. Rights of Trustee as Holder of Senior Indebtedness of the --------------------------------------------------------- Subsidiary Guarantors; Preservation of Trustee's Rights. - ------------------------------------------------------- The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness of the Subsidiary Guarantors which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Subsidiary Guarantors, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. 73 SECTION 12.18. Article Applicable to Paying Agents. ----------------------------------- In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as ------- used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that neither Section 12.09 nor Section 12.12 shall apply to the Company or any Wholly Owned Subsidiary if it or such Wholly owned Subsidiary acts as Paying Agent. SECTION 12.19. Liquidation, Dissolution and Bankruptcy --------------------------------------- To the extent any payment of Senior Indebtedness of a Subsidiary Guarantor (whether by or on behalf of such Subsidiary Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Indebtedness of such Subsidiary Guarantor or part thereof originally intended to be satisfied shall for purposes of this Article 12 be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Indebtedness of such Subsidiary Guarantor is declared to be fraudulent, invalid or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligation so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been so affected) shall for purposes of this Article 12 be deemed to be reinstated and outstanding as Senior Indebtedness of such Subsidiary Guarantor as if such declaration, invalidty or setting aside had not occurred. ARTICLE 13 Miscellaneous ------------- SECTION 13.01. Compliance Certificates and Opinions. Upon any ------------------------------------ application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee, to the extent required by the TIA or this Indenture, (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture (including any covenant, compliance with which constitutes a condition precedent) relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: 74 (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 13.02. Form of Documents Delivered to Trustee. In any case where -------------------------------------- several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or opinion of counsel may be based, and may state that it is so based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate of opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 13.03. Acts of Holders. --------------- (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by a specified percentage of Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such specified percentage of Holders in person or by agents duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are received by the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of --- execution of any such instrument or of a writing appointing any such agent shall be sufficient for any 75 purpose of this Indenture and (subject to Sections 7.01 and 7.02) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient, including the execution of such instrument or writing without more. (c) The ownership, principal amount and serial numbers of Securities held by any Person, and the date of holding the same, shall be proved by the Security Register. (d) If the Company shall solicit from the Holders of Securities any request, demand, authorization, direction, notice, consent, waiver or other Act, the Company may, at its option, by or pursuant to Board Resolution, fix in advance a record date for the determination of Holders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other Act, but the Company shall have no obligation to do so. Such record date shall be the record date specified in or pursuant to such Board Resolution, which shall be a date not earlier than the date 30 days prior to the first solicitation is completed. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other Act may be given before or after such record date, but only the Holders of record at the close of business on such record date shall be deemed to be Holders for the purposes of determining whether Holders of the requisite proportion of outstanding Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other Act, and for that purpose the outstanding Securities shall be computed as of such record date; provided that -------- no such authorization, agreement or consent by the Holders on such record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than eleven months after the record date. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (f) Without limiting the foregoing, a Holder entitled hereunder to give or take any action with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any different part of such principal amount. 76 SECTION 13.04. Trust Indenture Act Controls. If any provision of this ----------------------------- Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the Trust Indenture Act, the required provision shall control. If any provision of this Indenture modifies or excludes any provision of the TIA that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or excluded, as the case may be. SECTION 13.05. Notices. Any notice or communication shall be in writing -------- and delivered in person, or sent by registered or certified mail, by air courier guaranteeing overnight delivery or by fax (promptly confirmed by telephone) and addressed as follows: if to the Company or any Subsidiary Guarantor: The Wiser Oil Company 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Chief Financial Officer Phone: (214) 265-0080 Fax: (214) 373-3610 with a copy to: Thompson & Knight, P.C. 1700 Pacific Ave. Dallas, Texas 75201 Attn: Steven K. Cochran Phone: (214) 969-1387 Fax: (214) 969-1751 if to the Trustee: Texas Commerce Bank National Association 2200 Ross Avenue, 5th Floor Dallas, Texas 75201 Attn: Global Trust Services Phone: (214) 965-3510 Fax: (214) 965-3577 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication sent to a Holder shall be sent to the Holder at the Holder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so sent within the time prescribed. 77 Failure to send a notice or communication to a Holder or any defect in it shall not effect its sufficiency with respect to other Holders. If a notice or communication is given in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.06. Communication by Holders with Other Holders. Holders may -------------------------------------------- communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 13.07. When Securities Disregarded. In determining whether the ---------------------------- Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any of its Affiliates shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. The Trustee may require an Officer's Certificate listing Securities owned by the Company or any of its Affiliates. SECTION 13.08. Rules by Trustee, Paying Agent and Registrar. The Trustee --------------------------------------------- may make reasonable rules for action by or a meeting of Holders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.09. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday --------------- or a day on which banking institutions are not required to be open in the State of New York and the State of Texas. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.10. Governing Law. This Indenture and the Securities shall be -------------- deemed contracts and instruments made under the laws of the State of New York and shall be construed and enforced in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of law. SECTION 13.11. No Recourse Against Others. A director, officer, employee --------------------------- or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.12 Submission to Jurisdiction; Appointment of Agent for Service ------------------------------------------------------------ of Process; Waiver of Immunities. - -------------------------------- (a) Each party hereby irrevocably submits itself to the jurisdiction of the State and federal courts of the State of New York and agrees and consents that service of process may be made upon it in any legal proceeding relating to this Indenture the Securities or any transaction contemplated hereby or thereby (a "Proceeding") by any means allowed under New York or federal ---------- 78 law. The parties hereto hereby waive and agree not to assert, by way of motion, as a defense or otherwise, that any Proceeding is brought in an inconvenient forum or that the venue thereof is improper. In furtherance thereof, each party hereby acknowledges and agrees that it was not inconvenient for it to negotiate and receive funding of the transactions contemplated by this Indenture in such state and that it will be neither inconvenient nor unfair to litigate or otherwise resolve any disputes or claims in a court sitting in such state. (b) Each party hereby irrevocably designates CT Corporation System located at 1633 Broadway, New York, New York 10019, as the designee, appointee and agent (the "Process Agent") of such party to receive, for and on behalf of ------------- such party, service of process in such respective jurisdictions in any Proceeding with respect to this Indenture or the Securities. It is understood that a copy of such process served on such agent will be promptly forwarded by overnight courier to such party at its address set forth herein, but the failure of such party to receive such copy shall not affect in any way the service of such process. Each party further irrevocably consents to the service of process of any of the aforementioned courts in any such Proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its said address, such service to become effective 30 days after such mailing. (c) Service may be made by delivering by hand a copy of such process to the Company or the Subsidiary Guarantors, as the case may be, in care of the Process Agent at the address specified above. The Company and the Subsidiary Guarantors hereby irrevocably authorize and direct the Process Agent to accept such service on their behalf. Failure of the Process Agent to give notice to the Company or the Subsidiary Guarantors or failure of the Company or the Subsidiary Guarantors to receive notice of such service of process shall not affect in any way the validity of such service on the Process Agent or the Company or the Subsidiary Guarantors. As an alternative method of service, the Company and the Subsidiary Guarantors also irrevocably consent to the service of any and all process in any such proceeding by the delivery by hand of copies of such process to the Company or the Subsidiary Guarantors, as the case may be, at the applicable address specified in Section 13.05 hereof or at the address most recently furnished in writing by the Company or the Subsidiary Guarantors to the Trustee. The Company and the Subsidiary Guarantors covenant and agree that they shall take any and all reasonable action, including the execution and filing of any and all documents, that may be necessary to continue the designation of the Process Agent specified above in full force and effect during the term of the Securities, and to cause the Process Agent to continue to act as such. (d) The Company and the Subsidiary Guarantors irrevocably agree that, in any Proceedings anywhere (whether for an injunction, specific performance or otherwise), no immunity (to the extent that it may at any time exist, whether on the grounds of sovereignty or otherwise) from such Proceedings, from attachment (whether in aid of execution, before judgment or otherwise) of their assets or from execution of judgment shall be claimed by them or on their behalf or with respect to their assets, except to the extent required by applicable law, any such immunity being irrevocably waived, to the fullest extent permitted by applicable law. The Company and the Subsidiary Guarantors irrevocably agree that, where permitted by applicable law, they and their assets are, and shall be, subject to such Proceedings, attachment or execution in respect of their obligations under this Indenture or the Securities. 79 SECTION 13.13. Successors. All agreements of the Company and the ----------- Subsidiary Guarantors in this Indenture and the Securities or the Subsidiary Guaranties, as applicable, shall bind their successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.14. Multiple Originals. The parties may sign any number of ------------------- copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. This Indenture may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 13.15. Table of Contents; Headings. The table of contents, ---------------------------- cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 80 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first above written. THE COMPANY: THE WISER OIL COMPANY By: /s/ Lawrence J. Finn ------------------------------------- Name: Lawrence J. Finn ----------------------------------- Title: Chief Financial Officer ---------------------------------- and Assistant Secretary SUBSIDIARY GUARANTORS: WISER OIL DELAWARE, INC. By: /s/ Lawrence J. Finn ------------------------------------- Name: Lawrence J. Finn ----------------------------------- Title: Vice President, Treasurer ---------------------------------- and Assistant Secretary THE WISER MARKETING COMPANY By: /s/ Lawrence J. Finn ------------------------------------- Name: Lawrence J. Finn ----------------------------------- Title: Vice President ---------------------------------- and Assistant Secretary WISER DELAWARE LLC By: /s/ Lawrence J. Finn ------------------------------------- Name: Lawrence J. Finn ----------------------------------- Title: Vice President, Treasurer ---------------------------------- and Assistant Secretary S-1 THE WISER OIL COMPANY OF CANADA By: /s/ Lawrence J. Finn ------------------------------------- Name: Lawrence J. Finn ----------------------------------- Title: Vice President & ---------------------------------- Assistant Secretary ---------------------------------- T.W.O.C., INC. By: /s/ Lawrence J. Finn ------------------------------------- Name: Lawrence J. Finn ----------------------------------- Title: Vice President & ---------------------------------- Assistant Secretary ---------------------------------- TRUSTEE: TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ John G. Jones ------------------------------------- Name: John G. Jones ----------------------------------- Title: Vice President ---------------------------------- S-2 APPENDIX A FOR OFFERINGS TO QUALIFIED INSTITUTIONAL BUYERS PURSUANT TO RULE 144A, INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) AND TO CERTAIN PERSONS IN OFFSHORE TRANSACTIONS IN RELIANCE ON REGULATION S. PROVISIONS RELATING TO INITIAL SECURITIES ----------------------------------------- AND EXCHANGE SECURITIES ----------------------- 1. Definitions ----------- For the purposes of this Appendix A the following terms shall have the meanings indicated below. Capitalized terms used in this Appendix A but not otherwise defined herein have the meanings assigned to them in the Indenture, of which this Appendix A is a part. "Definitive Security" means a certificated Initial Security bearing ------------------- the restricted securities legend set forth in Section 2.3(d) and which is held by an IAI in accordance with Section 2.1(c). "Depository" means The Depository Trust Company, its nominees and ---------- their respective successors. "Exchange Securities" means the 9 1/2% Senior Subordinated Notes Due ------------------- 2007 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement. "IAI" means an institutional "accredited investor" as described in --- Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Initial Purchasers" means Salomon Brothers Inc, NationsBank Capital ------------------ Markets, Inc. and Nesbitt Burns Securities Inc. "Initial Securities" means the 9 1/2% Senior Subordinated Notes Due ------------------ 2007, issued under this Indenture on or about the date hereof. "Purchase Agreement" means the Purchase Agreement dated as of May 16, ------------------ 1997, among the Company, the Initial Subsidiary Guarantors and the Initial Purchasers, as such may be amended from time to time. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. --- "Registered Exchange Offer" means the offer by the Company, pursuant ------------------------- to the Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. 1 "Registration Agreement" means the Registration Agreement dated as of ---------------------- May 21, 1997, among the Company, the Initial Subsidiary Guarantors and the Initial Purchasers, as such may be amended from time to time. "Securities" means the Initial Securities and the Exchange Securities, ---------- treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Securities Custodian" means the custodian with respect to a Global -------------------- Security (as appointed by the Depository), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued ---------------------------- by the Company in connection with the offer and sale of Initial Securities pursuant to the Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and ------------------------------ Securities that bear or are required to bear the legend set forth in Section 2.3(d) hereto. 1.2 Other Definitions ----------------- TERM DEFINED IN SECTION: ---- ------------------ "Agent Members"..................... 2.1(b) "Global Security"................... 2.1(a) "Regulation S"...................... 2.1(a) "Rule 144A"......................... 2.1(a) 2. The Securities -------------- 2.1 Form and Dating --------------- The Initial Securities are being offered and sold by the Company pursuant to the Purchase Agreement. (a) Global Securities. Initial Securities offered and sold to a QIB ------------------ in reliance on Rule 144A under the Securities Act ("Rule 144A") or outside of --------- the United States to a non-U.S. Person in reliance on Regulation S under the Securities Act ("Regulation S"), in each case as provided in the Purchase ------------ Agreement, shall be issued initially in the form of one or more permanent global securities in definitive, fully registered form without interest coupons with the global securities legend and restricted securities legend set forth in Exhibit 1 hereto (each, a "Global Security"), which shall be deposited on behalf - --------- --------------- of the purchasers of the Initial Securities represented thereby with the Trustee, as custodian for the Depository (or with such other custodian as the Depository may direct), and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in the Indenture. The aggregate principal amount of the Global Securities may from time to time be increased or decreased 2 by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a ---------------------- Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b) and pursuant to an order of the Company, authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (ii) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. Members of, or participants in, the Depository ("Agent Members") shall ------------- have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or by the Trustee as the custodian of the Depository, or under any Global Security, and the Depository or its nominee, as the case may be, may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or shall impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. Ownership of beneficial interests in any Global Security will be shown on, and transfers thereof will be effected only through, records maintained by the Depository or its nominee (with respect to interests of Agent Members) and the records of Agent Members (with respect to interests of Persons other than Agent Members). (c) Definitive Securities. Except as provided in this Section 2.1 or ---------------------- Sections 2.3 or 2.4, owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. Purchasers of Initial Securities who are IAIs and are not QIBs and did not purchase Initial Securities sold in reliance on Regulation S will receive Definitive Securities; provided, however, that upon transfer of such Definitive -------- ------- Securities to a QIB, such Definitive Securities will, unless the Global Security has previously been exchanged, be exchanged for an interest in a Global Security pursuant to the provisions of Section 2.3. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) --------------- Initial Securities for original issue in an aggregate principal amount of $125,000,000 and (2) Exchange Securities for issue only in a Registered Exchange Offer pursuant to the Registration Agreement, for a like principal amount of Initial Securities, upon a written order of the Company signed by two Officers of the Company. Such order shall specify the amount of the Securities to be authenticated and the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities or Exchange Securities. The aggregate principal amount of Securities outstanding at any time may not exceed $125,000,000, except as provided in Section 2.07 of this Indenture. 3 2.3 Transfer and Exchange. ---------------------- (a) Transfer and Exchange of Definitive Securities. When Definitive ----------------------------------------------- Securities are presented to the Registrar or a co-registrar with a request: (x) to register the transfer of such Definitive Securities; or (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or - -------- ------- exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect; or (C) if such Definitive Securities are being transferred pursuant to an exemption from registration in accordance with Rule 144, (i) a certification to that effect (in the form set forth on the reverse of the Security) and (ii) if the Company or Registrar so requests, an opinion of counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(d)(i). (b) Restrictions on Transfer of a Definitive Security for a ------------------------------------------------------- Beneficial Interest in a Global Security. A Definitive Security may not be - ----------------------------------------- exchanged for a beneficial interest in a Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: 4 (i) certification, in the form set forth on the reverse of the Security, that such Definitive Security is being transferred (A) to a QIB in accordance with Rule 144A, or (B) outside the United States in an offshore transaction within the meaning of Regulation S and in compliance with Rule 904 under the Securities Act; and (ii) written instructions directing the Trustee to make, or to direct the Securities custodian to make, an adjustment on its books and records with respect to such Global Security to reflect an increase in the aggregate principal amount of the Securities represented by the Global Security, such instructions to contain information regarding the Depository account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities custodian to cause, in accordance with the standing instructions and procedures existing between the Depository and the Securities custodian, the aggregate principal amount of Securities represented by the Global Security to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Security equal to the principal amount of the Definitive Security so cancelled. If no Global Securities are then outstanding and the Global Security has not been previously exchanged pursuant to Section 2.4, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officer's Certificate, a new Global Security in the appropriate principal amount. (c) Transfer and Exchange of Global Securities. ------------------------------------------- (i) The transfer and exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Depository a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security. The Depository shall, in accordance with such instructions credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and debit the account of the Person making the transfer of the beneficial interest in the Global Security being transferred. (ii) Notwithstanding any other provisions of this Appendix A ---------- (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository. (iii) In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to Section 2.4 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification 5 requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Legend. ------- (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Initial Security certificate evidencing the Global Securities and the Definitive Securities (and all Initial Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING -------------- THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c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c)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT." Each Definitive Security will also bear the following additional legend: "IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Definitive Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security that is represented by a Global Security, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Definitive Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, 7 in either case, if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Security). (iii) After a transfer of any Initial Securities during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities, all requirements pertaining to legends on such Initial Security will cease to apply, the requirements requiring any such Initial Security issued to certain Holders be issued in global form will cease to apply, and an Initial Security in certificated or global form without legends will be available to the transferee of the Holder of such Initial Securities upon exchange of such transferring Holder's certificated Initial Security. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officer's Certificate to the Trustee instructing the Trustee to issue Securities without legends. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities pursuant to which certain Holders of such Initial Securities are offered Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will cease to apply and certificated Initial Securities with the restricted securities legend set forth in Exhibit 1 hereto will be available to --------- Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. Upon the occurrence of any of the circumstances described in this paragraph, the Company will deliver an Officer's Certificate to the Trustee instructing the Trustee to issue Securities without legends. (e) Cancellation or Adjustment of Global Security. At such time as ---------------------------------------------- all beneficial interests in a Global Security have either been exchanged for certificated or Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security is exchanged for certificated or Definitive Securities, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (f) Obligations with Respect to Transfers and Exchanges of ------------------------------------------------------ Securities. - ----------- (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall, upon receipt of a written order in the form of an Officer's Certificate, authenticate certificated Securities, Definitive Securities and Global Securities at the Registrar's or co- registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith. 8 (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of any Security for a period beginning 15 days before the mailing of a notice of an offer to repurchase Securities or 15 days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (g) No Obligation of the Trustee. ----------------------------- (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its mem bers, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 9 2.4 Certificated Securities ----------------------- (a) A Global Security deposited with the Depository or with the Trustee as custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of certificated Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as a depository for such Global Security or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, and a successor depository is not appointed by the Company within 90 days, (ii) the Company executes and delivers to the Trustee a notice that such Global Security shall be so transferable, registrable and exchangeable, and such transfer shall be registrable or (iii) there shall have occurred and be continuing an Event of Default or an event which, with the giving of notice or lapse of time or both, would constitute an Event of Default with respect to the Securities represented by such Global Security. (b) Any Global Security that is exchangeable for certificated Securities pursuant to this Section 2.4 will be transferred to, and registered and exchanged for, certificated Securities in authorized denominations and registered in such names as the Depository or its nominee holding such Global Security may direct. Subject to the foregoing, a Global Security is not exchangeable, except for a Global Security of like denomination to be registered in the name of the Depository or its nominee. In the event that a Global Security becomes exchangeable for certificated Securities, (i) certificated Securities will be issued only in fully registered form in denominations of $1,000 or integral multiples thereof, (ii) payment of principal, premium, any repurchase price, and interest on the certificated Securities will be payable, and the transfer of the certificated Securities will be registrable, at the office or agency of the Company maintained for such purposes and (iii) no service charge will be made for any issuance of the certificated Securities, but the Company may require payment of a sum sufficient to cover any transfer tax, assessment or similar governmental charge payable in connection therewith. In addition, such certificates will bear the legend set forth in Section 2.3(d) (unless the Company determines otherwise in accordance with applicable law) subject, with respect to such Securities, to the provisions of such legend. Holders of certificated Securities may only transfer their Securities (i) to the Company or (ii) to a QIB; provided, however, that the agreement of such holder -------- ------- is subject to any requirement of law that the disposition of such holder's property shall at all times be and remain within its control. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Company will promptly make available to the Trustee a reasonable supply of certificated Securities in definitive, fully registered form without interest coupons. 10 EXHIBIT 1 to APPENDIX A [FORM OF FACE OF INITIAL SECURITY] THE WISER OIL COMPANY No._____ CUSIP No.__________ [Global Securities Legend] UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW --- YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES IN DEFINITIVE, FULLY REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC NOTIFIES THE COMPANY THAT IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY FOR THIS GLOBAL SECURITY OR IF AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY" REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A SUCCESSOR DEPOSITORY IS NOT APPOINTED BY THE COMPANY WITHIN 90 DAYS OF SUCH NOTICE, (B) THE COMPANY EXECUTES AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS GLOBAL SECURITY SHALL BE TRANSFERABLE, REGISTRABLE AND EXCHANGEABLE, AND SUCH TRANSFER SHALL BE REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED AND IS CONTINUING WITH RESPECT TO THE SECURITIES. [Restricted Securities Legend] 1 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS -------------- SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE SECOND ANNIVERSARY OF THE ISSUANCE HEREOF (OR A PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(c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c)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN INSTITUTIONAL ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN 2 "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (o)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT. [IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]/1/ GLOBAL SECURITY Representing 9 1/2% Senior Subordinated Notes Due 2007 THE WISER OIL COMPANY, a Delaware corporation, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum indicated on Schedule A hereof, on May 15, 2007. Interest Payment Dates: May 15 and November 15, commencing November 15, 1997. Record Dates: May 1 and November 1. Additional provisions of this Security are set forth on the other side of this Security. - ------------------ /1/ Include if a Definitive Security to be held by an institutional "accredited investor" (as defined in Rule 501(a),(1),(2),(3) or (7) under the Securities Act) who is not a Qualified Institutional Buyer. 3 IN WITNESS WHEREOF, THE WISER OIL COMPANY has caused this instrument to be duly executed under its corporate seal. Dated: May 21, 1997 THE WISER OIL COMPANY By: --------------------------------- Name: ------------------------------- Title: ------------------------------ By: --------------------------------- Name: ------------------------------- Title: ------------------------------ TRUSTEE'S CERTIFICATE OF AUTHENTICATION TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: ---------------------------- Authorized Signatory 4 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 9 1/2% Senior Subordinated Note Due 2007 1. Interest -------- (a) General. The Wiser Oil Company, a Delaware corporation (such -------- corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the ------- principal amount of this Security at the rate per annum shown above. The Company will pay interest semiannually on May 15 and November 15 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30- day months. (b) Special Interest. The holder of this Security is entitled to the ----------------- benefits of a Registration Agreement, dated as of May 21, 1997, among the Company , the Initial Subsidiary Guarantors and the Initial Purchasers named therein (as such may be amended from time to time, the "Registration ------------ Agreement"). Capitalized terms used in this subsection (b) but not defined - --------- herein have the meanings assigned to them in the Registration Agreement. In the event that (i) neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been filed with the Commission by July 21, 1997, (ii) neither the Exchange Offer Registration Statement has been declared effective nor the Shelf Registration Statement has been filed by September 18, 1997, (iii) neither the Registered Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective on or prior to October 20, 1997, or (iv) after either the Exchange Offer Registration Statement or the Shelf Registration Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable in connection with resales of the Securities at any time that the Company is obligated to maintain the effectiveness thereof pursuant to the Registration Agreement (each such event referred to in clauses (i) through (iv) above being referred to herein as a "Registration Default"), additional interest ("Special Interest") will accrue on -------------------- ---------------- this Security (in addition to the interest described in subsection (a) above) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. Special Interest shall accrue at a rate of 0.5% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by 0.25% per annum with respect to each subsequent 90-day period, but in no event shall Special Interest accrue at a rate in excess of 1.50% per annum with respect to all Registration Defaults. Special Interest will be payable to the holder hereof in the same manner as interest under subsection (a) above. 5 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the May 1 or November 1 immediately preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company, but, at the option of the Company, interest may be paid by check mailed to the registered Holders at their registered addresses. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on -------- ------- the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately pre ceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, Texas Commerce Bank National Association ("Trustee") will act as ------- Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of May 21, 1997 (as such may be amended from time to time, the "Indenture"), among the --------- Company, the Initial Subsidiary Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) ------ 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms --- defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture and the Act for a statement of those terms. If any provision of the Securities conflicts with a provision in the Indenture, the terms of the Indenture shall control. If any provision of the Securities modifies or excludes any provision of the Indenture that may be so modified or excluded, the latter provision shall be deemed to apply to the Securities as so modified or excluded, as the case may be. The Securities are unsecured senior subordinated obligations of the Company limited to $125,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Initial Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities 6 pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Pari Passu Indebtedness and Subordinated Indebtedness of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal, premium and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed the Obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- The Securities are not redeemable prior to May 15, 2002. At any time on or after May 15, 2002, the Securities are redeemable at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest date), if redeemed during the 12-month period commencing May 15 of the years indicated below. Redemption Year Price ---- ----- 2002...................................... 104.750% 2003...................................... 103.167% 2004...................................... 101.583% 2005 and thereafter....................... 100.000% Notwithstanding the foregoing, prior to May 15, 2000 the Company may, at any time or from time to time, redeem up to 33 1/3% of the aggregate principal amount of the Securities originally outstanding at a redemption price of 109.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net proceeds of one or more Equity Offerings of the Company, provided that at least 66 2/3% of the aggregate -------- principal amount of the Securities originally issued remains outstanding immediately after the occurrence of such redemption and provided, further, -------- ------- that such redemption shall occur not later than 75 days after the date of the closing of any such Equity Offering. 7 6.Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied as set out in Section 3.03 of the Indenture, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7.Put Provisions -------------- Upon a Change of Control, except to the extent the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part (equal to $1,000 in principal amount or an integral multiple thereof) of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. In the event that the aggregate amount of Excess Proceeds from Asset Sales exceeds $5.0 million, the Company will, subject to certain conditions specified in the Indenture, make an offer to repurchase Securities having an aggregate principal amount equal to the aggregate amount of Excess Proceeds (less the portion thereof which may be allocable, in certain circumstances, to Pari Passu Indebtedness) at a purchase price equal to 100% of the principal amount of such Securities plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8.Subordination ------------- The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Subsidiary Guarantor, as defined in the Indenture. The Company and each Subsidiary Guarantor agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney- in-fact for such purpose. 9.Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 (or in the case of Definitive Securities sold to institutional accredited investors as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, minimum denominations of $250,000, unless the Company 8 otherwise consents) and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10.Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11.Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12.Discharge and Defeasance ------------------------ Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal, premium and interest on the Securities to redemption or maturity, as the case may be. 13.Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide for the assumption of the obligations of the Company under the Indenture upon the merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole and certain other events specified in Article 5 of the Indenture, (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities, (iv) to comply with any requirement of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, (v) to make any change that does not adversely affect the rights of any Holder of Securities in any material respect, (vi) to add or remove Subsidiary Guarantors pursuant to the procedures set forth in the Indenture, and (vii) to provide for certain other modifications and amendments as set forth in the Indenture. Certain provisions of the Securities and the Indenture may not be amended or waived without the consent of each Holder affected thereby. 9 14.Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) failure to pay any interest on the Securities when due, and such failure continues for 30 days, (ii) failure to pay principal of (or premium, if any, on) the Securities when due, (iii) failure to perform any other covenant of the Company or any Subsidiary Guarantor in the Indenture, continued for 60 days after written notice as provided in the Indenture, (iv) the occurrence and continuation beyond any applicable grace period of any default in the payment of the principal of (or premium, if any, on) or interest on any Indebtedness of the Company (other than the Securities) or any Restricted Subsidiary for money borrowed when due (whether resulting from maturity, acceleration, mandatory redemption or otherwise), or any other default causing acceleration of any Indebtedness of the Company or any Restricted Subsidiary for money borrowed, provided that the -------- aggregate principal amount of such Indebtedness shall exceed $5.0 million; (v) one or more final judgments or orders by a court of competent jurisdiction are entered against the Company or any Restricted Subsidiary in an uninsured or unindemnified aggregate amount outstanding at any time in excess of $5.0 million and such judgments or orders are not discharged, waived, stayed, satisfied or bonded for a period of 60 consecutive days, (vi) certain events of bankruptcy, insolvency or reorganization with respect to the Company, or any Restricted Subsidiary that together with its Subsidiaries (a) accounted for more than 5% of the consolidated revenues of the Company and its Restricted Subsidiaries, taken as a whole, for the most recently completed fiscal year of the Company, or (b) was the owner of more than 5% of the consolidated assets of the Company and its Restricted Subsidiaries, taken as a whole, at the end of such fiscal year, all as shown in the case of (a) and (b) in the consolidated financial statements of the Company and its Restricted Subsidiaries for such fiscal year, or (vii) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of the Indenture and such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty. Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15.Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 10 16.No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or a Subsidiary Guarantor under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17.Governing Law; Submission to Jurisdiction ----------------------------------------- (a) THIS SECURITY SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE HOLDER OF THIS SECURITY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS SECURITY BY ANY MEANS ALLOWED UNDER NEW YORK OR FEDERAL LAW. THE HOLDER OF THIS SECURITY HEREBY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER. IN FURTHERANCE THEREOF, THE HOLDER HEREOF ACKNOWLEDGES AND AGREES THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH STATE. (b) THE HOLDER OF THIS SECURITY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM LOCATED AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE, APPOINTEE AND AGENT OF SUCH HOLDER TO RECEIVE, FOR AND ON BEHALF OF SUCH HOLDER, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO SUCH HOLDER AT ITS ADDRESS SET FORTH IN THE INDENTURE, BUT THE FAILURE OF SUCH HOLDER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. THE HOLDER OF THIS SECURITY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. 11 18.Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19.Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20.Holders' Compliance with Registration Agreement ----------------------------------------------- Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21.CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security 12 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to - ------------------------------------------------------------------------------ (Print or type assignee's name, address and zip code) - ------------------------------------------------------------------------------ (Insert assignee's social security or tax I.D. No.) and irrevocably appoint ______________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Your Signature: ---------------- --------------------------------------- - ------------------------------------------------------------------------------ Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [ ] to the Company; or (2) [ ] pursuant to an effective registration statement under the Securities Act of 1933; or (3) [ ] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or 13 (4) [ ] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act of 1933 in compliance with Rule 904 under the Securities Act of 1933; or (5) [ ] to an institutional "accredited investor" (as defined in Schedule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (6) [ ] pursuant to another available exemption from registration provided by Rule 144 under the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box -------- ------- (4), (5) or (6) is checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------------------ Signature Signature Guarantee: - ---------------------------- ------------------------------------ Signature must be guaranteed Signature - ------------------------------------------------------------------------------ Notice: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. 14 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ------------------ ---------------------------------------------- NOTICE: To be executed by an executive officer 15 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, check the appropriate box: Section 4.06 [ ] Section 4.09 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, state the amount in principal amount (must be an integral multiple of $1,000): $__________ Dated: Your Signature: ---------------- -------------------------------- (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: --------------------------------- (Signature must be guaranteed) - ------------------------------------------------------------------------------- Notice: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. 16 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE A SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount at maturity of this Global Security shall be $__________. The following increases or decreases in this Global Security have been made:
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized Exchange Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or Global Security Global Security such decrease or increase Securities Custodian
17 EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY] THE WISER OIL COMPANY No._____ CUSIP No.__________ [Global Securities Legend] UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW --- YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. THIS GLOBAL SECURITY IS EXCHANGEABLE FOR SECURITIES IN DEFINITIVE, FULLY REGISTERED FORM, WITHOUT INTEREST COUPONS, IF (A) DTC NOTIFIES THE COMPANY THAT IT IS UNWILLING OR UNABLE TO CONTINUE AS DEPOSITORY FOR THIS GLOBAL SECURITY OR IF AT ANY TIME DTC CEASES TO BE A "CLEARING AGENCY" REGISTERED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND A SUCCESSOR DEPOSITORY IS NOT APPOINTED BY THE COMPANY WITHIN 90 DAYS OF SUCH NOTICE, (B) THE COMPANY EXECUTES AND DELIVERS TO THE TRUSTEE A NOTICE THAT THIS GLOBAL SECURITY SHALL BE TRANSFERABLE, REGISTRABLE AND EXCHANGEABLE, AND SUCH TRANSFER SHALL BE REGISTRABLE, OR (C) AN EVENT OF DEFAULT (AS HEREINAFTER DEFINED) HAS OCCURRED AND IS CONTINUING WITH RESPECT TO THE SECURITIES. 1 GLOBAL SECURITY Representing 9 1/2% Senior Subordinated Notes Due 2007 THE WISER OIL COMPANY, a Delaware corporation, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum indicated on Schedule A hereof, on May 15, 2007. Interest Payment Dates: May 15 and November 15, commencing November 15, 1997. Record Dates: May 1 and November 1. Additional provisions of this Security are set forth on the other side of this Security. IN WITNESS WHEREOF, THE WISER OIL COMPANY has caused this instrument to be duly executed under its corporate seal. Dated: THE WISER OIL COMPANY By: -------------------------------- Name: ------------------------------ Title: ----------------------------- By: -------------------------------- Name: ------------------------------ Title: ----------------------------- TRUSTEE'S CERTIFICATE OF AUTHENTICATION TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee, certifies that this is one of the Securities referred to in the Indenture. By: -------------------------- Authorized Signatory 2 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY] 9 1/2% Senior Subordinated Note Due 2007 1. Interest -------- The Wiser Oil Company, a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the principal amount of this ------- Security at the rate per annum shown above. The Company will pay interest semiannually on May 15 and November 15 of each year. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered Holders of Securities at the close of business on the May 1 or November 1 immediately preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company, but, at the option of the Company, interest may be paid by check mailed to the registered Holders at their registered addresses. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on -------- ------- the Securities may also be made, in the case of a Holder of at least $1,000,000 aggregate principal amount of Securities, by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately pre ceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, Texas Commerce Bank National Association ("Trustee"), will act ------- as Paying Agent and Registrar. The Company may appoint and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Restricted Subsidiaries may act as Paying Agent, Registrar or co-registrar. 3 4. Indenture --------- The Company issued the Securities under an Indenture dated as of May 21, 1997 (as such may be amended from time to time, the "Indenture"), among the --------- Company, the Initial Subsidiary Guarantors and the Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) ------ 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms --- defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Holders are referred to the Indenture and the Act for a statement of those terms. If any provision of the Securities conflicts with a provision in the Indenture, the terms of the Indenture shall control. If any provision of the Securities modifies or excludes any provision of the Indenture that may be so modified or excluded, the latter provision shall be deemed to apply to the Securities as so modified or excluded, as the case may be. The Securities are unsecured senior subordinated obligations of the Company limited to $125,000,000 aggregate principal amount at any one time outstanding (subject to Section 2.07 of the Indenture). This Security is one of the Exchange Securities referred to in the Indenture. The Securities include the Initial Securities and any Exchange Securities issued in exchange for the Initial Securities pursuant to the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Pari Passu Indebtedness and Subordinated Indebtedness of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. To guarantee the due and punctual payment of the principal, premium and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed the Obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- The Securities are not redeemable prior to May 15, 2002. At any time on or after May 15, 2002, the Securities are redeemable at the option of the Company, in whole or in part, on not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of principal amount), plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest date), if redeemed during the 12-month period commencing May 15 of the years indicated below. 4 Redemption Year Price ---- ----- 2002....................................... 104.750% 2003....................................... 103.167% 2004....................................... 101.583% 2005 and thereafter........................ 100.000% Notwithstanding the foregoing, prior to May 15, 2000 the Company may, at any time or from time to time, redeem up to 33 1/3% of the aggregate principal amount of the Securities originally outstanding at a redemption price of 109.500% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net proceeds of one or more Equity Offerings of the Company, provided that at least 66 2/3% of the aggregate -------- principal amount of the Securities originally issued remains outstanding immediately after the occurrence of such redemption and provided, further, that -------- ------- such redemption shall occur not later than 75 days after the date of the closing of any such Equity Offering. 6. Notice of Redemption -------------------- Notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions as set forth in Section 3.03 of the Indenture are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions -------------- Upon a Change of Control, except to the extent the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part (equal to $1,000 in principal amount or to an integral multiple thereof) of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. In the event that the aggregate amount of Excess Proceeds from Asset Sales exceeds $5.0 million, the Company will, subject to certain conditions specified in the Indenture, make an offer to repurchase Securities having an aggregate principal amount equal to the aggregate amount of Excess Proceeds (less the portion thereof which may be allocable, in certain circumstances, to Pari Passu Indebtedness) at a purchase price equal to 100% of the principal amount of such Securities plus accrued and unpaid interest, if any, to the purchase date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 5 8. Subordination ------------- The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Subsidiary Guarantor, as defined in the Indenture. The Company and each Subsidiary Guarantor agrees, and each Holder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney- in-fact for such purpose. 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 (or in the case of Definitive Securities sold to institutional accredited investors as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, minimum denominations of $250,000, unless the Company otherwise consents) and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions set forth in the Indenture, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal, premium and interest on the Securities to redemption or maturity, as the case may be. 6 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount outstanding of the Securities and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount outstanding of the Securities. Subject to certain exceptions set forth in the Indenture, without the consent of any Holder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities (i) to cure any ambiguity, omission, defect or inconsistency, (ii) to provide for the assumption of the obligations of the Company under the Indenture upon the merger, consolidation or sale or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole and certain other events specified in Article 5 of the Indenture, (iii) to provide for uncertificated Securities in addition to or in place of certificated Securities, (iv) to comply with any requirement of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act, (v) to make any change that does not adversely affect the rights of any Holder of Securities in any material respect, (vi) to add or remove Subsidiary Guarantors pursuant to the procedures set forth in the Indenture, and (vii) to provide for certain other modifications and amendments as set forth in the Indenture. Certain provisions of the Securities and the Indenture may not be amended or waived without the consent of each Holder affected thereby. 14. Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) failure to pay any interest on the Securities when due, and such failure continues for 30 days; (ii) failure to pay principal of (or premium, if any, on) the Securities when due; (iii) failure to perform any other covenant of the Company or any Subsidiary Guarantor in the Indenture, continued for 60 days after written notice as provided in the Indenture; (iv) the occurrence and continuation beyond any applicable grace period of any default in the payment of the principal of (or premium, if any, on) or interest on any Indebtedness of the Company (other than the Securities) or any Restricted Subsidiary for money borrowed when due (whether resulting from maturity, acceleration, mandatory redemption or otherwise), or any other default causing acceleration of any Indebtedness of the Company or any Restricted Subsidiary for money borrowed, provided that the -------- aggregate principal amount of such Indebtedness shall exceed $5.0 million; (v) one or more final judgments or orders by a court of competent jurisdiction are entered against the Company or any Restricted Subsidiary in an uninsured or unindemnified aggregate amount outstanding at any time in excess of $5.0 million and such judgments or orders are not discharged, waived, stayed, satisfied or bonded for a period of 60 consecutive days; (vi) certain events of bankruptcy, insolvency or reorganization with respect to the Company, or any Restricted Subsidiary that, together with its Subsidiaries (a) accounted for more than 5% of the consolidated revenues of the Company and its Restricted Subsidiaries, taken as a whole, for the most recently completed fiscal year of the Company, or (b) was the owner of more than 5% of the consolidated assets of the Company and its Restricted Subsidiaries, taken as a whole, at the end of such fiscal year, all as shown, in the case of (a) and (b) on the consolidated financial statements of the Company and its Restricted Subsidiaries for such fiscal year; or (vii) a Subsidiary Guaranty ceases to be in full force and effect (other than in accordance with the terms of the Indenture and such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty. 7 Holders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the Trust Indenture Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or a Subsidiary Guarantor under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Holder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 8 17. Governing Law; Submission to Jurisdiction ----------------------------------------- (a) THIS SECURITIY SHALL BE DEEMED A CONTRACT AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE HOLDER OF THIS SECURITY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS SECURITY BY ANY MEANS ALLOWED UNDER NEW YORK OR FEDERAL LAW. THE HOLDER OF THIS SECURITY HEREBY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER. IN FURTHERANCE THEREOF, THE HOLDER HEREOF ACKNOWLEDGES AND AGREES THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH STATE. (b) THE HOLDER OF THIS SECURITY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM LOCATED AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE, APPOINTEE AND AGENT OF SUCH HOLDER TO RECEIVE, FOR AND ON BEHALF OF SUCH HOLDER, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO SUCH HOLDER AT ITS ADDRESS SET FORTH IN THE INDENTURE, BUT THE FAILURE OF SUCH HOLDER TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. THE HOLDER OF THIS SECURITY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. 18. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 9 19. Abbreviations ------------- Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Holders' Compliance with Registration Agreement ----------------------------------------------- Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture which has in it the text of this Security. 10 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) - ------------------------------------------------------------------------------- (Insert assignee's social security or tax I.D. No.) and irrevocably appoint _____________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated: Your Signature: ------------------ --------------------------------- - ------------------------------------------------------------------------------- Sign exactly as your name appears on the other side of this Security. - -------------------- Signature Guarantee: - ------------------------------------------------------------------------------- Signature must be guaranteed Notice: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. 11 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, check the appropriate box: Section 4.06 [ ] Section 4.09 [ ] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, state the amount in principal amount (must be an integral of $1,000): $_______________ Dated: Your Signature: ---------------- ------------------------------ (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: ----------------------------- (Signature must be guaranteed) - ------------------------------------------------------------------------------- Notice: Signature(s) must be guaranteed by an institution which is a participant in the Securities Transfer Agent Medallion Program ("STAMP") or similar program. 12 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE A SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The initial principal amount at maturity of this Global Security shall be $__________. The following increases or decreases in this Global Security have been made:
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized Exchange Principal Amount of this Principal Amount of this Global Security following signatory of Trustee or Global Security Global Security such decrease or increase Securities Custodian
13 EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ---------------------- _______________, among [SUBSIDIARY GUARANTOR] (the "New Subsidiary Guarantor"), ------------------------ a subsidiary of The Wiser Oil Company (or its successor), a Delaware corporation (the "Company"), THE WISER OIL COMPANY, the Subsidiary Guarantors (the "Existing ------- -------- Subsidiary Guarantors") under the Indenture referred to below, and TEXAS - --------------------- COMMERCE BANK NATIONAL ASSOCIATION, as trustee under the Indenture referred to below (the "Trustee"). ------- W I T N E S S E T H : WHEREAS the Company has heretofore executed and delivered to the Trustee an Indenture (as such may be amended from time to time, the "Indenture"), dated as of May 21, 1997, providing for the issuance of an --------- aggregate principal amount of $125,000,000 of 9 1/2% Senior Subordinated Notes due 2007 (the "Securities"); ---------- WHEREAS Section 4.13 of the Indenture provides that under certain circumstances the Company is required to cause the New Subsidiary Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Subsidiary Guarantor shall unconditionally guarantee all of the Company's obligations under the Securities pursuant to a Subsidiary Guaranty on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and Existing Subsidiary Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without ------------ definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof. 1 2. Agreement to Guarantee. The New Subsidiary Guarantor hereby ----------------------- agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee the Company's obligations under the Securities on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. From and after the date hereof, the New Subsidiary Guarantor shall be a Subsidiary Guarantor for all purposes under the Indenture and the Securities. 3. Ratification of Indenture; Supplemental Indentures Part of ---------------------------------------------------------- Indenture. Except as expressly amended hereby, the Indenture is in all respects - ---------- ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, -------------- AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 5. Trustee Makes No Representation. The Trustee makes no -------------------------------- representation as to the validity or sufficiency of this Supplemental Indenture. 6. Counterparts. The parties may sign any number of copies of this ------------- Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 7. Effect of Headings. The Section headings herein are for ------------------- convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW SUBSIDIARY GUARANTOR] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ THE WISER OIL COMPANY By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 2 [SUBSIDIARY GUARANTORS] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ TEXAS COMMERCE BANK NATIONAL ASSOCIATION, as Trustee By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ 3 EX-4.3 3 REGISTRATION AGREEMENT EXHIBIT 4.3 =================================== REGISTRATION AGREEMENT Dated as of May 21, 1997 by and among THE WISER OIL COMPANY and THE SUBSIDIARY GUARANTORS named herein and SALOMON BROTHERS INC NATIONSBANC CAPITAL MARKETS, INC. and NESBITT BURNS SECURITIES INC. as the Initial Purchasers =================================== $125,000,000 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 TABLE OF CONTENTS ----------------- Page ---- 1. Definitions......................................................... 1 2. Exchange Offer...................................................... 5 3. Shelf Registration.................................................. 8 4. Special Interest.................................................... 9 5. Registration Procedures............................................. 11 6. Registration Expenses............................................... 18 7. Indemnification..................................................... 19 8. Rules 144 and 144A.................................................. 23 9. Underwritten Registrations.......................................... 23 10. Miscellaneous....................................................... 23 (a) No Inconsistent Agreements................................... 23 (b) Adjustments Affecting Registrable Notes...................... 24 (c) Amendments and Waivers....................................... 24 (d) Notices...................................................... 24 (e) Successors and Assigns....................................... 25 (f) Counterparts................................................. 26 (g) Headings..................................................... 26 (h) Governing Law; Submission to Process......................... 26 (i) Severability................................................. 27 (j) Notes Held by the Issuers or their Affiliates................ 27 (k) Third Party Beneficiaries.................................... 27 (i) REGISTRATION AGREEMENT This Registration Agreement (the "Agreement") is dated as of May 21, 1997, by and among The Wiser Oil Company, a Delaware corporation (the "Company"), Wiser Oil Delaware, Inc., a Delaware corporation, Wiser Delaware LLC, a Delaware limited liability company, The Wiser Marketing Company, a Delaware corporation, T.W.O.C., Inc., a Delaware corporation, and The Wiser Oil Company of Canada, a Nova Scotia unlimited liability company (collectively, the "Subsidiary Guarantors"), and Salomon Brothers Inc, NationsBanc Capital Markets, Inc., and Nesbitt Burns Securities Inc. (collectively, the "Initial Purchasers"). This Agreement is entered into in connection with the Purchase Agreement, dated May 16, 1997, among the Company, the Subsidiary Guarantors and the Initial Purchasers (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of $125,000,000 aggregate principal amount of the Company's 9 1/2% Senior Subordinated Notes due 2007 (the "Notes"), which Notes will be guaranteed by the Subsidiary Guarantors. The Company and the Subsidiary Guarantors are collectively referred to herein as the "Issuers." In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and their direct and indirect transferees. The execution and delivery of this Agreement is a condition to the obligation of the Initial Purchasers to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions ----------- As used in this Agreement, the following terms shall have the following meanings: Agreement: Has the meaning provided in the first introductory --------- paragraph hereto. Applicable Period: Has the meaning provided in Section 2(b) hereof. ----------------- Closing Date: Has the meaning provided in the Purchase Agreement. ------------ Company: Has the meaning provided in the first introductory paragraph ------- hereto. Effectiveness Date: September 18, 1997. ------------------ Effectiveness Period: Has the meaning provided in Section 3(a) -------------------- hereof. Exchange Act: The Securities Exchange Act of 1934, as amended, and ------------ the rules and regulations of the SEC promulgated thereunder. Exchange Notes: Has the meaning provided in Section 2(a) hereof. -------------- Exchange Offer: Has the meaning provided in Section 2(a) hereof. -------------- Exchange Offer Registration Statement: Has the meaning provided in ------------------------------------- Section 2(a) hereof. Filing Date: July 21, 1997. ----------- Holder: Any holder of a Registrable Note or Registrable Notes. ------ Indemnified Person: Has the meaning provided in Section 7(c) hereof. ------------------ Indemnifying Person: Has the meaning provided in Section 7(c) hereof. ------------------- Indenture: The Indenture, dated as of May 21, 1997 among the Company, --------- the Subsidiary Guarantors and Texas Commerce Bank National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. Initial Purchasers: Has the meaning provided in the first ------------------ introductory paragraph hereto. Inspectors: Has the meaning provided in Section 5(n) hereof. ---------- Issue Date: The date on which the original Notes were sold to the ---------- Initial Purchasers pursuant to the Purchase Agreement. Issuers: Has the meaning provided in the second introductory ------- paragraph hereto. NASD: Has the meaning provided in Section 5(r) hereof. ---- Notes: Has the meaning provided in the second introductory paragraph ----- hereto. Participant: Has the meaning provided in Section 7(a) hereof. ----------- Participating Broker-Dealer: Has the meaning provided in Section 2(b) --------------------------- hereof. -2- Person(s): An individual, trustee, corporation, partnership, limited --------- liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. Private Exchange: Has the meaning provided in Section 2(b) hereof. ---------------- Private Exchange Notes: Has the meaning provided in Section 2(b) ---------------------- hereof. Prospectus: The prospectus included in any Registration Statement ---------- (including, without limitation, any prospectus subject to completion and a prospectus that includes any infor mation previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement including post- effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: Has the meaning provided in the second ------------------ introductory paragraph hereto. Records: Has the meaning provided in Section 5(n) hereof. ------- Registrable Notes: Each Note upon original issuance of the Notes and ----------------- at all times subsequent thereto, each Exchange Note as to which Section 2(d)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(d)(iv) hereof is applicable, the Exchange Offer Registration Statement) covering or (in the case of the Exchange Offer Registration Statement) providing for the exchange of such Note, or covering such Exchange Note or Private Exchange Note, as the case may be, has been declared effective by the SEC and such Note (unless such Note was not tendered for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case may be, is sold in compliance with Rule 144, (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture or (iv) such Note, Exchange Note or Private Exchange Note, as the case may be, may be resold without restriction pursuant to Rule 144. Registration Default: Has the meaning provided in Section 4(a) hereof. -------------------- -3- Registration Statement: Any registration statement of the Company, ---------------------- including, but not limited to, the Exchange Offer Registration Statement, that covers or (in the case of the Exchange Offer Registration Statement) provides for the exchange of any of the Registrable Notes pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. Rule 144: Rule 144 promulgated under the Securities Act, as such Rule -------- may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the Securities Act, as such --------- Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities Act, as such Rule -------- may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. --- Securities Act: The Securities Act of 1933, as amended, and the rules -------------- and regulations of the SEC promulgated thereunder. Shelf Notice: Has the meaning provided in Section 2(d) hereof. ------------ Shelf Registration: Has the meaning provided in Section 3(a) hereof. ------------------ Shelf Registration Statement: shall mean a "shelf" registration ---------------------------- statement of the Company and the Subsidiary Guarantors for a Shelf Registration which covers all of the Registrable Notes on an appropriate form under Rule 415, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. Subsidiary Guarantors: Has the meaning provided in the first --------------------- introductory paragraph hereto. TIA: The Trust Indenture Act of 1939, as amended. --- -4- Transfer Restricted Notes: Has the meaning provided in Section 4(a) ------------------------- hereof. Trustee(s): The trustee under the Indenture and, if existent, the ---------- trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). Underwritten registration or underwritten offering: A registration in -------------------------------------------------- which securities of one or more of the Issuers are sold to an underwriter for reoffering to the public. 2. Exchange Offer -------------- (a) Each of the Issuers agrees to file with the SEC under the Securities Act no later than the Filing Date a registration statement on Form S- 4 or other appropriate form (the "Exchange Offer Registration Statement") registering the Company's offer to exchange (the "Exchange Offer") any and all of the Registrable Notes (other than the Private Exchange Notes, if any) for a like aggregate principal amount of debt securities of the Company, guaranteed, on the same basis as the Notes, by the Subsidiary Guarantors, which are identical in all material respects to the Notes (the "Exchange Notes") (and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA), except that the offering and sale by the Company of the Exchange Notes (other than Private Exchange Notes, if any) shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Exchange Offer shall comply in all material respects with all applicable tender offer rules and regulations under the Exchange Act. Unless the Exchange Offer would not be permitted by applicable law or SEC policy, the Issuers agree to use their reasonable best efforts to (x) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to the Holders; and (z) consummate the Exchange Offer on or prior to October 20, 1997. If after such Exchange Offer Registration Statement is declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Exchange Offer Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder who participates in the Exchange Offer will be required to represent to the Issuers in writing that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, and that such Holder in not an "affiliate" of any of the Issuers within the meaning of the Securities Act. Upon consummation of the Exchange Offer in accordance -5- with this Section 2, the Issuers shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which Section 2(d)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Offer Registration Statement. (b) The Issuers shall include within the Prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the Staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the Staff of the SEC or such positions or policies, in the judgment of the Initial Purchasers, represent the prevailing views of the Staff of the SEC. Such "Plan of Distribution" section shall also expressly permit the use of the Prospectus included in the Exchange Offer Registration Statement by all Persons subject to the prospectus deliv ery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes. Each of the Issuers shall use its reasonable best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by any Participating Broker-Dealer subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes; provided, however, that such period shall not exceed 90 days after the - -------- ------- consummation of the Exchange Offer (the "Applicable Period"). If, prior to consummation of the Exchange Offer, an Initial Purchaser holds any Notes acquired by it and having the status of an unsold allotment in the initial distribution, the Issuers shall, upon the request of such Initial Purchaser delivered to the Company not later than 10 days prior to the consummation of the Exchange Offer, simultaneously with the delivery of the Exchange Notes in the Exchange Offer issue and deliver to such Initial Purchaser in exchange (the "Private Exchange") for such Notes held by such Initial Purchaser a like principal amount of debt securities of the Company, guaranteed by the Subsidiary Guarantors, that are identical in all material respects to the Exchange Notes (the "Private Exchange Notes") (and which are issued pursuant to the same Indenture as the Exchange Notes) except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. -6- Interest on the Exchange Notes and the Private Exchange Notes will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Issuers shall: (1) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, the City of New York; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Issuers shall: (1) accept for exchange all Notes validly tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (2) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Notes so accepted for exchange, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Notes and the Private Exchange Notes shall be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture, which in either event shall provide that (1) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (2) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. -7- (c) Notwithstanding any other provisions hereof, the Issuers shall ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any Prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such Prospectus, does not include, as of the consummation of the Exchange Offer, an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (d) If, (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, the Issuers determine that they are not permitted to effect an Exchange Offer, (ii) for any other reason the Exchange Offer is not consummated by October 20, 1997, (iii) any holder of Private Exchange Notes so requests by notice to the Company within 10 days after the consummation of the Private Exchange, or (iv) any Holder (other than a Participating Broker-Dealer) is not eligible under applicable law or SEC policy to participate in the Exchange Offer or does not receive freely tradeable Exchange Notes in the Exchange Offer (other than due solely to the status of such Holder as an affiliate of any of the Issuers within the meaning of the Securities Act) and so notifies the Company (which notice shall specify in reasonable detail the reasons therefor) within 10 days after the consummation of the Exchange Offer, then the Company shall promptly deliver written notice thereof (the "Shelf Notice") to the Trustee and, in the case of clauses (i) and (ii) above, all Holders, and shall file a Shelf Registration pursuant to Section 3 hereof. 3. Shelf Registration ------------------ If a Shelf Notice is delivered as contemplated by Section 2(d) hereof, then: (a) Shelf Registration. The Issuers shall as promptly as reasonably ------------------ practicable file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "Shelf Registration") provided, however, that no holder of Notes or Exchange Notes (other than the Initial Purchasers) shall be entitled to have Notes or Exchange Notes held by it covered by such Shelf Registration Statement unless such holder agrees in writing to be bound by the provisions of this Agreement applicable to such holder. If the Issuers shall not have yet filed an Exchange Offer Registration Statement, each of the Issuers shall use its reasonable best efforts to file with the SEC the Shelf Registration Statement on or prior to the Filing Date. The Shelf Registration Statement shall be on Form S-3 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Issuers -8- shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration Statement. Each of the Issuers shall use its reasonable best efforts to (i) cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the Effectiveness Date (in the case where the Issuers have not yet filed an Exchange Offer Registration Statement) and on or prior to the 60th day after the filing of the Shelf Registration Statement (in all other cases) and (ii) keep the Shelf Registration Statement continuously effective under the Securities Act until the date which is two years from the Issue Date, or such shorter period ending when all Registrable Notes covered by the Shelf Registration Statement have been sold in the manner set forth and as contemplated in the Shelf Registration Statement (in either case, the "Effectiveness Period"). The Issuers shall be deemed not to have used their reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if any of them voluntarily takes any action that would result in Holders of the Registrable Notes covered thereby not being able to offer and sell such Registrable Notes during that period, unless such action is required by applicable law; provided, however, that the foregoing shall not -------- ------- apply to actions taken by the Issuers in good faith and for valid business reasons (not including avoidance of their obligations hereunder), including, without limitation, the acquisition or divestiture of assets, so long as the Issuers within 120 days thereafter comply with the requirements of Section 5 hereof. (b) Withdrawal of Stop Orders. If the Shelf Registration Statement ------------------------- ceases to be effective for any reason at any time during the Effectiveness Period, each of the Issuers shall use its reasonable best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof. (c) Supplements and Amendments. The Issuers shall promptly supplement -------------------------- and amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. 4. Special Interest. (a) The parties hereto agree that the Holders of ---------------- Transfer Restricted Notes (as defined below) will suffer damages if the Issuers fail to fulfill their obligations under Section 2 or Section 3 hereof, as applicable, and that it would not be feasible to ascertain the extent of such damages. Accordingly, if (i) by the Filing Date, neither the Exchange Offer Registration Statement nor the Shelf Registration Statement has been filed with, the SEC, (ii) by the Effectiveness Date, neither the Exchange Offer Registration Statement has been declared effective by, nor the Shelf Registration Statement has been filed with, the SEC, (iii) by October 20, 1997, neither the Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective by the SEC or (iv) after either the Exchange Offer Registration Statement or the Shelf Registration -9- Statement has been declared effective, such Registration Statement thereafter ceases to be effective or usable (except as permitted under the last sentence of Section 3(a) or under Section 5(b) hereof) in connection with resales of Registrable Notes in accordance with and during the periods specified herein (each such event referred to in clauses (i) through (iv), a "Registration Default"), interest ("Special Interest") will accrue on the Registrable Notes (in addition to the stated interest on the Registrable Notes) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. Special Interest will accrue at a rate of 0.5% per annum during the 90-day period immediately following the occurrence of any Registration Default and shall increase by an additional 0.25% per annum with respect to each subsequent 90-day period, but in no event shall such rate exceed 1.50% per annum with respect to all Registration Defaults. Following the cure of all Registration Defaults, the accrual of Special Interest will cease. "Transfer Restricted Notes" means (a) with respect to a Note or a Private Exchange Note or an Exchange Note as to which Section 2(d)(iv) applies, such Note or Private Exchange Note or Exchange Note as to which Section 2(d)(iv) applies until (i) the date on which such Note has been exchanged for a freely transferrable Exchange Note in the Exchange Offer, (ii) the date of consummation of the Exchange Offer in the case where the Holder of such Note was eligible to participate in the Exchange Offer and elected not to tender such Note in the Exchange Offer (iii) the date on which such Note or Private Exchange Note or Exchange Note as to which Section 2(d)(iv) applies has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note or Private Exchange Note or Exchange Note as to which Section 2(d)(iv) applies is distributed to the public pursuant to Rule 144 under the Securities Act or is salable pursuant to Rule 144(k) under the Securities Act and (b) with respect to an Exchange Note received by a Participating Broker-Dealer, such Exchange Note until sold by such Participating Broker-Dealer through the delivery of the Prospectus contained in the Exchange Offer Registration Statement. Notwithstanding anything to the contrary in this Section 4(a), the Company shall not be required to pay Special Interest to the holder of Transfer Restricted Notes if such holder: (a) failed to comply with its obligations to make the representations in the first paragraph of Section 2; or (b) failed to provide the information required to be provided by it, if any, pursuant to the second to last paragraph of Section 5. (b) The Issuers shall notify the Trustee and the paying agent (which shall not be any of the Issuers for these purposes) under the Indenture immediately upon the happening of each and every Registration Default. The Issuers shall pay the Special Interest due on the Transfer Restricted Notes by depositing with the paying agent, in trust, for the benefit of the Holders thereof, prior to 10:00 a.m., New York City time on the next interest payment date specified by the Indenture, sums sufficient to pay the Special Interest then due. The Special Interest due shall be payable on each interest payment date specified by the Indenture to the record holder entitled to receive the interest payment to be made on such date. Each obligation to pay Special Interest shall be deemed to accrue from and including the date of the applicable Registration Default. -10- (c) Notwithstanding the foregoing, the time periods specified in Section 4(a) shall be tolled during the pendency of any circumstances beyond the Company's control that prevent performance by the Company of its obligations hereunder despite the Company's best efforts. Such matters include events affecting issuers generally, such as the temporary closure of federal agencies, and events directly affecting the Company, such as the Company's inability to obtain all information regarding an acquisition entity within a time period that would permit independent auditors to prepare any required audited financial information on a timely basis. (d) The parties hereto agree that the Special Interest provided for in this Section 4 constitutes a reasonable estimate of and is intended to constitute the sole remedy for the damages that will be suffered by holders of Transfer Restricted Notes by reason of the failure of the Shelf Registration Statement or the Exchange Offer Registration Statement, as the case may be, to be filed, to be declared effective or to remain effective, or the Exchange Offer to be consummated, as the case may be, to the extent required by this Agreement. 5. Registration Procedures ----------------------- In connection with the filing of a Registration Statement pursuant to Section 2 or 3 hereof, the Issuers shall effect such registration(s) to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Issuers hereunder, the Issuers shall: (a) Prepare and file with the SEC a Registration Statement or Registration Statements as prescribed by Section 2 or 3 hereof, and use their reasonable best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, however, that, if -------- ------- (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Issuers shall, if requested at least 10 business days prior to such filing, furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five business days prior to such filing). The Issuers shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document, if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, -11- or the managing underwriters, if any, shall reasonably object within five days after the receipt thereof. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration Statement or Exchange Offer Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period or until consummation of the Exchange Offer, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed, if required, pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Company shall be deemed not to have used its reasonable best efforts to keep a Registration Statement effective during the Effectiveness Period or the Applicable Period if it voluntarily takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or unless such action is taken in good faith and for valid business reasons (not including avoidance of its obligations hereunder), including without limitation, the acquisition or divestiture of assets so long as the Company within 120 days thereafter complies with this Agreement, including without limitation, the provisions of paragraph 5(k) hereof and the last paragraph of this Section 5. (c) If (1) a Shelf Registration Statement is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, the Company shall notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Registration Statement or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post- effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Issuers, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated therein by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a Prospectus is required by the Securities Act to be delivered in connection with sales of the -12- Registrable Notes or resales of Exchange Notes by Participating Broker-Dealers the representations and warranties of the Issuers contained in any agreement (including any underwriting agreement) contemplated by Section 5(n) hereof cease to be true and correct, (iv) of the receipt by the Issuers of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the determination by the Issuers that a post- effective amendment to a Registration Statement would be appropriate. (d) Use its reasonable best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes for sale in any jurisdiction, and, if any such order is issued, to use its reasonable best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 hereof and if requested by the managing underwriter or underwriters (if any), or the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, or counsel for any of them reasonably request to be included therein or (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Issuers have received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable -13- Notes and to each such Participating Broker-Dealer who so requests, their respective counsel, and each managing underwriter, if any, at the sole expense of the Issuers, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Issuers, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, each Issuer hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Offer Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use their reasonable best efforts to register or qualify such Registrable Notes (and to cooperate with selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes) for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; provided, however, that where -------- ------- Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Issuers agree to cause their counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided, however, that none of the Issuers shall be required to (A) -------- ------- qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general -14- service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any; facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request at least two business days prior to any sale thereof. (j) Use its reasonable best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holders thereof or the underwriter or underwriters, if any, to dispose of such Registrable Notes, except as may be required solely as a consequence of the nature of a selling Holder's business, in which case each of the Issuers will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Issuers, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Partici pating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (l) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes or Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case may be. (m) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably -15- requested by the managing underwriter or underwriters in order to facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Issuers and their respective subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by Issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) obtain the written opinion of counsel to the Issuers and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities similar to the Notes and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Issuers (and, if necessary, any other independent certified public accountants of any subsidiary of any of the Issuers or of any business acquired by any of the Issuers for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities similar to the Notes and such other matters as reasonably requested by the managing underwriter or underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (n) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Offer Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Issuers and their respective subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Issuers and their respective subsidiaries to make available for inspection all information reasonably requested by any -16- such Inspector in connection with such Registration Statement. Records which any of the Issuers determine, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel (a copy of which shall be delivered to the Issuers) for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information in such Records has been made generally available to the public (other than as a result of a violation of this Agreement). Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree in writing that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Issuers unless and until such information is generally available to the public. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Issuers and allow the Issuers to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Issuers' sole expense. (o) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer Registration Statement or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its reasonable best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (p) Comply in all material respects with all applicable rules and regulations of the SEC and make generally available to its securityholders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) (which need not be audited) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the -17- Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (q) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Issuers (or to such other Person as directed by the Issuers) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (r) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (s) Use their reasonable best efforts to take all other steps reasonably necessary or advisable to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Issuers may require each seller of Registrable Notes as to which any Registration Statement is being effected to furnish to the Issuers such information regarding such seller and the distribution of such Registrable Notes as the Issuers may, from time to time, reasonably request. The Issuers may exclude from such Registration Statement the Registrable Notes of any seller who unreasonably fails to furnish such information within 15 days after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Issuers all information required to be disclosed in order to make the information previously furnished to the Issuers by such seller not materially misleading. All Holders shall cooperate in the Company's preparation for the Exchange Offer and any Shelf Registration. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Issuers of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing by the Issuers that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. If so directed by the Company, each -18- Holder shall deliver to the Company all copies of the Prospectus covering such Registrable Notes that was current at the time of receipt of such notice. 6. Registration Expenses --------------------- (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Issuers shall be borne by the Issuers whether or not the Exchange Offer Registration Statement or a Shelf Registration Statement is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of one counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the printing of Prospectuses is requested by the managing underwriter or underwriters, if any, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Issuers, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance by or incident to such performance), (vi) rating agency fees, if any, and any fees associated with making the Registrable Notes or Exchange Notes eligible for trading through The Depository Trust Company, (vii) Securities Act liability insurance, if the Issuers desire such insurance, (viii) fees and expenses of all other Persons retained by the Issuers, (ix) internal expenses of the Issuers (including, without limitation, all salaries and expenses of officers and employees of the Issuers performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange or any inter-dealer quotation system, if applicable, and (xii) the expenses relating to word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. Each Holder of Registrable Notes offered pursuant to a Registration Statement and each Participating Broker-Dealer shall pay any discounts or commissions incurred upon the sale of Registrable Notes or Exchange Notes pursuant to a Registration Statement. (b) The Issuers, jointly and severally, shall reimburse the Holders of the Registrable Notes being registered in a Shelf Registration for the reasonable fees and disbursements of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a -19- majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement. In addition, the Issuers, jointly and severally, shall reimburse the Initial Purchasers for the reasonable fees and expenses of one counsel in connection with the Exchange Offer and shall not be required to pay any other legal expenses of the Initial Purchasers in connection therewith. 7. Indemnification. (a) Each of the Issuers, jointly and --------------- severally, agrees to indemnify and hold harmless each Holder of Registrable Notes offered pursuant to a Shelf Registration Statement and each Participating Broker-Dealer selling Exchange Notes during the Applicable Period, the affiliates, directors, officers, agents, representatives and employees of each such Person or its affiliates, and each other Person, if any, who controls any such Person or its affiliates within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant") from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement pursuant to which the offering of such Registrable Notes or Exchange Notes, as the case may be, is registered (or any amendment thereto) or related Prospectus (or any amendments or supplements thereto) or any related preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Issuers will -------- ------- not be required to indemnify a Participant if (i) such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use therein or (ii) if such Participant sold to the person asserting the claim the Registrable Notes or Exchange Notes which are the subject of such claim and such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and it is established by the Issuers in the related proceeding that such Participant failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes sold to such Person if required by applicable laws, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Issuers with Section 5 of this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Issuers, their respective directors and officers and each Person who controls the Issuers within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Issuers to each Participant, but only (i) with reference to -20- information relating to such Participant furnished to the Issuers in writing by or on behalf of such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus or (ii) with respect to any untrue statement or representation made by such Participant in writing to the Issuers. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding; provided, however, that the failure to so notify the -------- ------- Indemnifying Person shall not relieve it of any obligation or liability which it may have hereunder or otherwise (unless and only to the extent that such failure directly results in the loss or compromise of any material rights or defenses by the Indemnifying Person and the Indemnifying Person was not otherwise aware of such action or claim). In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Person shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the Indemnifying Person shall not, in connection with any one such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and any such separate firm for the Issuers, their directors, their officers and such control Persons of the Issuers shall be designated in writing by the Issuers. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its prior written consent, but if settled with such consent or if there be a final non- appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such -21- settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses actually incurred by counsel as contemplated by the third sentence of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; provided, however, that the Indemnifying Person shall not be liable -------- ------- for any settlement effected without its consent pursuant to this sentence if the Indemnifying Person is contesting, in good faith, the request for reimbursement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in Section 7(a) and 7(b) hereof is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, than each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation --- ---- (even if the Participants were treated as one entity for such purposes) or by any other method of allocation that does not take -22- account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Notes, Exchange Notes or Private Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rules 144 and 144A. The Company covenants that it will use ------------------ commercially reasonable efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time the Company is not required to file such reports, it will, upon the written request of any Holder of Registrable Notes, make publicly available such other information necessary to permit sales of such Registrable Notes pursuant to Rule 144. The Company further covenants for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A. 9. Underwritten Registrations. If any of the Registrable Notes -------------------------- covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and reasonably acceptable to the Issuers; provided that the Company shall not be obligated to arrange for more than one underwritten offering during the Effectiveness Period. No Holder of Registrable Notes may participate in any underwritten registration hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, -23- underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous. (a) No Inconsistent Agreements. None of the ------------- -------------------------- Issuers have entered, as of the date hereof, and none of the Issuers shall, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. None of the Issuers have entered and none of the Issuers will enter into any agreement with respect to any of its securities which will grant to any Person piggy-back registration rights with respect to a Registration Statement. (b) Adjustments Affecting Registrable Notes. None of the Issuers --------------------------------------- shall, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this Agreement may not ---------------------- be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold by such Holders pursuant to such Registration Statement; provided, however, that the provisions -------- ------- of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. (d) Notices. All notices and other communications (including without ------- limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first- class mail, next-day air courier or facsimile: 1. if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture, with a copy in like manner to the Initial Purchasers as follows: -24- Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Facsimile No: (212) 783-2278 Attention: Corporate Finance Department with a copy to: Vinson & Elkins L.L.P. 2001 Ross Avenue 3700 Trammell Crow Center Dallas, Texas 75201 Facsimile No: (214) 220-7716 Attention: Jay H. Hebert, Esq. 2. if to the Initial Purchasers, at the address specified for Salomon Brothers Inc in Section 10(d)(1); 3. if to an Issuer, as follows: The Wiser Oil Company 8115 Preston Road, Suite 400 Dallas, Texas 75225 Facsimile No: (214) 373-3610 Attention: Chief Financial Officer with a copy to: Thompson & Knight 1700 Pacific Avenue, Suite 3300 Dallas, Texas 75201 Facsimile No.: (214) 969-1751 Attention: Steven K. Cochran All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. -25- Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the successors and assigns of each of the parties hereto; provided, however, that this Agreement shall not inure to the benefit of or be - -------- ------- binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. (f) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law; Submission to Process. (1) THIS AGREEMENT SHALL BE ------------------------------------ DEEMED A CONTRACT AND INSTRUMENT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE STATE OF NEW YORK AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING RELATING TO THIS AGREEMENT BY ANY MEANS ALLOWED UNDER NEW YORK OR FEDERAL LAW. THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER. IN FURTHERANCE THEREOF, EACH PARTY HEREBY ACKNOWLEDGES AND AGREES THAT IT WAS NOT INCONVENIENT FOR IT TO NEGOTIATE AND RECEIVE FUNDING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN SUCH STATE AND THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH STATE. (2) EACH PARTY HEREBY IRREVOCABLY DESIGNATES CT CORPORATION SYSTEM LOCATED AT 1633 BROADWAY, NEW YORK, NEW YORK 10019, AS THE DESIGNEE, APPOINTEE AND AGENT OF SUCH PARTY TO RECEIVE, -26- FOR AND ON BEHALF OF SUCH PARTY, SERVICE OF PROCESS IN SUCH RESPECTIVE JURISDICTIONS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT. IT IS UNDERSTOOD THAT A COPY OF SUCH PROCESS SERVED ON SUCH AGENT WILL BE PROMPTLY FORWARDED BY OVERNIGHT COURIER TO SUCH PARTY AT ITS ADDRESS SET FORTH IN SECTION 10(D), BUT THE FAILURE OF SUCH PARTY TO RECEIVE SUCH COPY SHALL NOT AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS. EACH PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. (i) Severability. If any term, provision, covenant or restriction of ------------ this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Notes Held by the Issuers or their Affiliates. Whenever the --------------------------------------------- consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Issuers or their affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third Party Beneficiaries. Holders of Registrable Notes and ------------------------- Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. -27- IN WITNESS WHEREOF, the parties have executed the Agreement as of the date first written above. Company: THE WISER OIL COMPANY By: /s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn Title: Vice President Finance, Chief Financial Officer & Assistant Secretary Subsidiary Guarantors: WISER OIL DELAWARE, INC. By: /s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn Title: Vice President, Treasurer & Assistant Secretary WISER DELAWARE LLC By: /s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn Title: Vice President, Treasurer & Assistant Secretary THE WISER MARKETING COMPANY By: /s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn Title: Vice President & Assistant Secretary -28- THE WISER OIL COMPANY OF CANADA By: /s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn Title: Vice President & Assistant Secretary T.W.O.C., INC. By: /s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn Title: Vice President & Assistant Secretary The foregoing Agreement is hereby confirmed and accepted as of the date first above written: SALOMON BROTHERS INC NATIONSBANC CAPITAL MARKETS, INC. NESBITT BURNS SECURITIES INC. By: Salomon Brothers Inc By: /s/ David M. Smoot ---------------------------------- Name: David M. Smoot Title: Associate -29- EX-4.5 4 FIRST AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.5 FIRST AMENDMENT TO CREDIT AGREEMENT This First Amendment to Credit Agreement (this "Amendment") is entered into as of the 29th day of November, 1995, among The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), The Wiser Oil Company Canada Ltd., an Alberta corporation ("Wiser Canada" and collectively with Wiser U.S., the "Borrowers"), the financial institutions listed on the signature pages hereto (individually a "Bank" and collectively "Banks") and NationsBank of Texas, N.A., as agent for the ratable benefit of Banks (in such capacity, "Agent"). W I T N E S S E T H: WHEREAS, Borrowers, Agent and Banks entered into that certain Credit Agreement dated as of June 23, 1994 (the "Credit Agreement") (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrowers have requested that the Credit Agreement be amended to provide for, among other things, the incurrence of certain Debt and the granting of certain Liens in connection therewith, all as more specifically set forth herein; and WHEREAS, subject to the terms and conditions set forth herein, Banks have agreed to Borrowers' request. NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Borrowers, Agent and each Bank hereby agree as follows: 1. Modification of Section 1.1. 1.1. Section 1.1 of the Credit Agreement is hereby amended by changing the definitions therein of "Agreement," "Borrowing Base Deficiency," "Guarantee," "Loan Papers," "Permitted Encumbrances," "Permitted Investments" and "Subsidiaries" to read in their entirety as set forth below: "Agreement" means this Agreement, as amended through the First Amendment, as the same may be further modified, amended or supplemented pursuant to Section 13.5. ------------ "Borrowing Base Deficiency" means, as of any date, the amount, if any, by which the aggregate unpaid principal balance of Wiser U.S.'s Consolidated Funded Debt (but expressly excluding amounts outstanding under the Maljamar Credit Agreement) exceeds the Borrowing Base in effect on such date. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions, or other similar undertakings of support or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. "Loan Papers" means this Agreement, the First Amendment, the Notes, the Canadian Guaranty, the Stock Pledge and all other certificates, documents, or instruments delivered in connection with this Agreement, as the foregoing may be amended from time to time. "Permitted Encumbrances" means with respect to any asset: (a) Liens, if any, securing the Obligations; (b) Liens, if any, securing the Obligations (as defined in the Maljamar Credit Agreement) of Maljamar Development pursuant to the Maljamar Credit Agreement; (c) Minor defects in title which do not secure the payment of money and otherwise have no material adverse effect on the value or operation of any material asset encumbered thereby, including, without limitation, easements, rights-of-way, servitudes, permits, surface leases, restrictions and other similar charges, encumbrances or title defects; (d) Inchoate statutory or operators' Liens securing obligations for labor, services, materials and supplies furnished in connection with the drilling, development and production of oil, gas and mineral properties, or in connection with the marketing of production therefrom, which are not delinquent (except to the extent permitted by Section 8.6); ----------- (e) Mechanic's, materialman's, warehouseman's, journeyman's, carrier's, and other similar Liens arising by operation of Law in the ordinary course of business, securing obligations which are not delinquent (except to the extent permitted by Section 8.6); ----------- (f) Liens for Taxes, assessments or other governmental charges not delinquent (except to the extent permitted by Section 8.6); ----------- (g) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits or (ii) -2- to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than capital leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with any Hedge Transaction, the borrowing of money, the obtaining of advances on credit or the payment of the deferred purchase price of property; (h) any attachment or judgment Lien which is subordinate to the Liens in favor of Agent created pursuant to the Loan Papers, unless the judgment it secures shall not, within thirty (30) days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within thirty (30) days after the expiration of any such stay; (i) Lease burdens payable to third parties which are either (i) deducted in the calculation of discounted present value in the Reserve Reports, including, without limitation, any royalty, overriding royalty, net profits interest, production payment, carried interest or reversionary working interest which has been disclosed to the Agent in writing, or (ii) which burden properties which are not included in the Reserve Reports; (j) a Lien securing Debt in the amount of $248,000 or less encumbering a lease known as Rocker A in Garza County, Texas, which Debt represents the deferred purchase price of such lease; and (k) Liens (including capital leases) encumbering property of Borrowers securing Debt incurred to finance the purchase price of such property; provided, that (i) no such Lien shall encumber any property of either Borrower other than the property acquired with the proceeds of such Debt, (ii) the Debt secured by any such Lien shall not exceed the purchase price of the property purchased with the proceeds of such Debt (including applicable excise Taxes and transaction costs), and (iii) the aggregate amount of all such Debt outstanding at any time shall not exceed $125,000 for each Borrower. "Permitted Investments" means (a) readily marketable direct obligations of the United States of America or any agency thereof (to the extent backed by the full faith and credit of the United States of America), (b) fully insured time deposits and certificates of deposit with maturities of one year or less of any commercial bank operating in the United States having capital and surplus in excess of $50,000,000.00, (c) commercial paper of a domestic issuer if at the time of purchase such paper is rated in one of the two highest ratings categories of Standard and Poor's Corporation or Moody's Investors Service, (d) Intercompany Loans, (e) the Marketable Securities held by T.W.O.C., Inc. on the date hereof and Marketable Securities hereafter acquired by T.W.O.C., Inc. with proceeds from the liquidation of Marketable Securities, (f) Investments in Maljamar Development (i) of the interests of Wiser U.S. in the Maljamar Field in Lea County and Eddy County, New Mexico and of funds to pay for the operation and maintenance of such properties, (ii) made pursuant to the Distribution Recapture Agreement, or (iii) otherwise -3- approved by Majority Banks, (g) other Investments; provided, that, Wiser U.S.'s and its Subsidiaries' aggregate basis in Investments made on or after September 28, 1993 which are outstanding at any time pursuant to this subsection (g) shall not exceed $3,000,000 U.S. (each Borrower acknowledges that Investments by Wiser U.S. in any of its Subsidiaries since September 28, 1993 and Investments by any such Subsidiary since September 28, 1993 in any other Subsidiary of Wiser U.S. are considered "Investments" for purposes of this definition and Section 9.8), and (h) Investments by Wiser ----------- U.S. in Wiser Canada (in addition to such Investments which are Permitted Investments pursuant to subsection (g) of this definition); not to exceed $5,000,000 U.S. outstanding at any time. "Subsidiary" means, for any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions (including that of a general partner) are at the time directly or indirectly owned, collectively, by such Person and any Subsidiaries of such Person. The term Subsidiary shall include Subsidiaries of Subsidiaries (and so on). Each of the Existing Subsidiaries, Maljamar Development and Maljamar Wiser, Inc., a Delaware corporation is a "Subsidiary" of Wiser U.S. 1.2. Section 1.1 of the Credit Agreement is hereby further amended by adding the following new definition of "Maljamar Development" immediately after the definition therein of "Majority Banks": "Maljamar Development" means Maljamar Development Partnership, L.P., a Texas limited partnership whose only partners are Wiser U.S. and Maljamar Wiser, Inc., a Delaware corporation, which is a wholly owned Subsidiary of Wiser U.S. 1.3. Section 1.1 of the Credit Agreement is hereby further amended by adding the following new definition of "Distribution Recapture Agreement" immediately after the definition therein of "Distribution": "Distribution Recapture Agreement" means that certain Distribution Recapture Agreement dated November 29, 1995, executed by Wiser U.S. in favor of Agent for the benefit of Banks described therein. 1.4. Section 1.1 of the Credit Agreement is hereby further amended by adding the following new definition of "First Amendment" immediately after the definition therein of "Financial Officer": "First Amendment" means that certain First Amendment to Credit Agreement dated as of November 29, 1995, by and among Borrowers, Agent and Banks. -4- 1.5. Section 1.1 of the Credit Agreement is hereby further amended by adding the following new definition of "Maljamar Credit Agreement" immediately preceding the definition therein of "Maljamar Development": "Maljamar Credit Agreement" means that certain Credit Agreement dated November 29, 1995, among Maljamar Development, Agent and the financial institutions listed on the signature pages thereto as Banks. 1.6. Section 1.1 of the Credit Agreement is hereby further amended by adding the following new definition of "Wiser Support Documents" immediately after the definition therein of "Wiser Canada": "Wiser Support Documents" means the Administrative Support Agreement, the Environmental Indemnity Agreement, the Distribution Recapture Agreement and the Operating Agreement, as each term is defined in the Maljamar Credit Agreement. 2. Modification of Section 9.3. Section 9.3 of the Credit Agreement is hereby amended to read in its entirety as follows: SECTION 9.3. Negative Pledge. Neither Borrower will create, assume --------------- or suffer to exist, and neither Borrower will permit any Subsidiary of Wiser U.S. to create, assume or suffer to exist, any Lien on any asset of Wiser U.S. or any of its Subsidiaries other than Permitted Encumbrances. Neither Borrower will enter into or become subject to, and neither Borrower will permit any Subsidiary of Wiser U.S. to enter into or become subject to, any agreement (other than this Agreement or the Maljamar Credit Agreement) that prohibits or otherwise restricts the right of Wiser U.S. or any of its Subsidiaries to create, assume or suffer to exist any Lien in favor of Agent or any Bank on any of Wiser U.S.'s or any of its Subsidiaries' assets. 3. Modification of Section 9.9. Section 9.9 of the Credit Agreement is hereby amended to read in its entirety as follows: SECTION 9.9. Transactions with Affiliates. Neither Borrower will ---------------------------- engage, and neither Borrower will permit any Subsidiary of Wiser U.S. to engage, in any transaction (other than transactions contemplated by the Wiser Support Documents) with an Affiliate (other than with either Borrower or a Subsidiary of Wiser U.S.) unless such transaction is as favorable to such Borrower or such Subsidiary as could reasonably be obtained in an arm's length transaction with an unaffiliated Person in accordance with prevailing industry custom and practices. 4. Modification of Section 11.1. Section 11.1 of the Credit Agreement is hereby amended by (a) deleting the word "or" from the end of clause (j) therein, (b) deleting the period from the end of clause (k) therein and adding a semicolon and the word "or" to the end of clause (k) therein, and (c) adding the following new clause (l) immediately after clause (k) therein: -5- (l) the occurrence of an Event of Default under, and as defined in, the Maljamar Credit Agreement; 5. Conditions Precedent to Effectiveness of Amendments. The amendments to the Credit Agreement contained in this Amendment shall be effective on the date upon which each of the following conditions shall have been fulfilled (the "Effective Date"): 5.1. Loan Papers. Each Borrower and each Bank shall have executed a ----------- counterpart hereof and delivered the same to the Agent, or in the case of any Bank as to which an executed counterpart hereof shall not have been so delivered, the Agent shall have received written confirmation by telecopy or other similar writing from such Bank of execution of a counterpart hereof by such Bank. 5.2. Corporate Existence and Authority. Borrowers shall have --------------------------------- delivered to Agent such resolutions, certificates and other documents as Agent shall request relative to the authorization, execution and delivery by Borrowers of this Amendment. 6. Borrowing Base. Effective as of September 30, 1995 and continuing until the next Determination Date, the Borrowing Base shall be $104,000,000 and the Canadian Borrowing Base shall be $52,000,000; provided that, if prior to the next Determination Date, Wiser U.S., pursuant to clause (f)(1) of the definition of Permitted Investments contained in this Amendment, contributes certain properties owned by Wiser U.S. and located in the Maljamar Field in Lea and Eddy Counties, New Mexico to Maljamar Development Partnership, L.P., a Texas limited partnership, effective upon the date of such contribution and continuing until the next Determination Date, the Borrowing Base shall be reduced to $80,000,000 and the Canadian Borrowing Base shall be $52,000,000. 7. Representations and Warranties of Borrower. To induce Banks and Agent to enter into this Amendment, each Borrower hereby represents and warrants to Agent and each Bank that: 7.1. Reaffirmation of Representations and Warranties. Each ----------------------------------------------- representation and warranty of the Borrowers contained in the Credit Agreement and the other Loan Papers is true and correct on the date hereof and will be true and correct after giving effect to this Amendment. 7.2. Corporate Authority; No Conflicts. The execution and delivery of --------------------------------- this Amendment and the performance by Borrowers of the Credit Agreement as amended through this Amendment are within each Borrower's corporate powers, have been duly authorized by necessary action, require no action by or in respect of, or filing with any Governmental Authority and do not violate or constitute a default under any provision of applicable Laws or any Material Agreement binding upon either Borrower or result in the creation or imposition of any Lien upon any of the assets of either Borrower except Permitted Encumbrances. -6- 7.3. Enforceability. The Credit Agreement as amended through this -------------- Amendment constitutes the valid and binding obligation of each Borrower enforceable in accordance with its terms, except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditor's rights generally, and (ii) the availability of equitable remedies may be limited by equitable principles of general application. 7.4. No Defenses. Neither Borrower has any defenses to payment, ----------- counterclaims or rights to set off with respect to the Obligations. 8. Miscellaneous. 8.1. Reaffirmation of Loan Papers. From and after the Effective Date, ---------------------------- the Credit Agreement shall be amended and modified as herein provided, but except as so amended and modified hereby, any and all of the terms and provisions of the Credit Agreement and the Loan Papers shall remain in full force and effect. The Credit Agreement and this Amendment shall be read, taken and construed as one and the same instrument. All references to the Credit Agreement in the Loan Papers shall be deemed to mean the Credit Agreement as amended through this Amendment. 8.2. Parties in Interest. All of the terms and provisions of the ------------------- Credit Agreement as amended through this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 8.3. Legal Expenses. Borrowers hereby agree to pay on demand all -------------- reasonable fees and expenses of counsel to Agent incurred by Agent, in connection with the preparation, negotiation and execution of this Amendment and all related documents. 8.4. Counterparts. This Amendment may be signed in any number of ------------ counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when the Agent shall have received counterparts hereof signed by all of the parties hereto or, in the case of any Bank as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic or other written confirmation from such Bank of execution of a counterpart hereof by such Bank; however, no party shall be bound by this Amendment until all parties have executed a counterpart. 8.5. Headings. The headings, captions and arrangements used in this -------- Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof. 8.6. Governing Law. THE CREDIT AGREEMENT AS AMENDED THROUGH THIS ------------- AMENDMENT AND, UNLESS OTHERWISE SPECIFIED THEREIN, ALL OF THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH -7- AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA. 8.7. COMPLETE AGREEMENT. THE CREDIT AGREEMENT AS AMENDED THROUGH THIS ------------------ AMENDMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. -8- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers on the date and year first written above. BORROWERS: --------- THE WISER OIL COMPANY, a Delaware corporation By: /s/ Lawrence J. Finn -------------------------------- Lawrence J. Finn Vice President THE WISER OIL COMPANY CANADA LTD., an Alberta corporation By: /s/ Lawrence J. Finn -------------------------------- Lawrence J. Finn Vice President BANKS: ----- NATIONSBANK OF TEXAS, N.A. By: /s/ Malcolm C. Turner -------------------------------- Its: Senior Vice President ------------------------------- PNC BANK, NATIONAL ASSOCIATION By: /s/ Michael Beyer -------------------------------- Its: Vice President ------------------------------- -9- AGENT: ----- NATIONSBANK OF TEXAS, N.A. By: /s/ Malcolm C. Turner -------------------------------- Malcolm C. Turner Senior Vice President -10- EX-4.6 5 SECOND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.6 May 20, 1997 The Wiser Oil Company 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Lawrence Finn The Wiser Oil Company of Canada 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Lawrence Finn Re: Second Amendment to Credit Agreement dated as of June 23, 1994 among The Wiser Oil Company ("Wiser"), The Wiser Oil Company Canada, Ltd., NationsBank of Texas, N.A., as Agent, and NationsBank of Texas, N.A. and PNC Bank, National Association, as Banks, as amended by that certain First Amendment to Credit Agreement dated November 29, 1995 (as amended by the First Amendment, the "Credit Agreement"). Terms defined in the Credit ---------------- Agreement shall have the same meanings when used herein, unless otherwise defined herein. Gentlemen: You have requested that the Banks and Agent agree to amend the Credit Agreement in certain respects and that the Banks and the Agent enter into certain other agreements with respect to the Credit Agreement. Based on the representations and warranties set forth herein and subject to the conditions set forth in Section 7 hereof, the Banks and Agent hereby agree with the --------- Borrowers as follows: Section 1. Credit Agreement Amendments. Subject to the satisfaction of --------- --------------------------- each condition precedent set forth in Section 6 of this letter agreement (this --------- "Amendment"), the Credit Agreement shall be amended as set forth in this - ---------- Section 1. - --------- 1.1 Section 1.1 of the Credit Agreement shall be amended to insert the ----------- following definitions in alphabetical order: "Commitment Fee Percentage" in effect on any day shall be the percentage determined pursuant to the table below based on the ratio of (a) Wiser U.S.'s Consolidated Senior Funded Debt on such day, to (b) the Borrowing Base in effect on such day. May 20, 1997 Page 2
====================================================================== Ratio of Consolidated Senior Funded Debt to Borrowing Base Commitment Fee Percentage ---------------------------------------------------------------------- less than .75 to 1 .25% ---------------------------------------------------------------------- equal to or more than .75 to 1 .375% ======================================================================
"Consolidated Senior Funded Debt" means, for Wiser U.S. at any time, the remainder of (a) its Consolidated Funded Debt, minus (b) the principal outstanding under the Subordinate Notes. "Consolidated Total Capital" means, for any Person as of any time, the sum of such Person's (a) consolidated liabilities at such time, plus (b) consolidated shareholders equity at such time, in each case as such amounts would be reflected on a consolidated balance sheet of such Person as of such time prepared in accordance with GAAP. "Second Amendment" means that certain letter agreement dated May 20, 1997 by and among Agent, Borrowers, T.W.O.C., Inc. and Banks. "Subordinate Notes" means Wiser U.S.'s Senior Subordinated Notes due 2007 in an aggregate amount of $125,000,000 which are to be issued pursuant to and governed by the Subordinate Notes Indenture. "Subordinate Notes Indenture" means an Indenture to be entered into by and between Wiser U.S. and Texas Commerce Bank National Association as Trustee which shall be substantially in the form of the draft thereof dated May 18, 1997, a copy of which has been provided by Wiser U.S. to each Bank. "Subsidiary Guaranty" means a Guaranty in form and substance acceptable to Agent to be executed by individual Subsidiaries of Borrower pursuant to Section 8.12 hereof or pursuant to the Second Amendment ------------ pursuant to which such Subsidiaries shall guaranty payment and performance in full of the Obligations. "Subsidiary Guarantors" means any Subsidiary of Wiser U.S. which has executed and delivered a Subsidiary Guaranty which is in full force and effect. 1.2. The definitions of the term "Applicable Margin," "Borrowing Base Deficiency," "Loan Papers," "Maximum Borrowing Base," "Permitted Investments," "Termination Date" and "Wiser Canada" set forth in Section 1.1 of the Credit ----------- Agreement are amended to read in full as follows: "Applicable Margin" in effect on any day shall be the percentage determined pursuant to the table below based on the ratio of (a) Wiser U.S.'s Consolidated Senior Funded Debt on such day, to (b) the Borrowing Base in effect on such day: May 20, 1997 Page 3
====================================================================== Ratio of Consolidated APPLICABLE MARGIN Senior Funded Debt to Borrowing Base Base Rate Advance Eurodollar Advance ---------------------------------------------------------------------- less than .5 to 1 0% .625% ---------------------------------------------------------------------- more than or equal to .5 to 1 less than .75 to 1 0% .875% ---------------------------------------------------------------------- more than or equal to .75 to 1 .375% 1.25% ======================================================================
"Borrowing Base Deficiency" means, as of any day, the amount, if any, by which the aggregate unpaid principal balance of Wiser U.S.'s Consolidated Senior Funded Debt exceeds the Borrowing Base in effect on such day. "Loan Papers" means this Agreement, the First Amendment, the Second Amendment, the Notes, the Canadian Guaranty, each Subsidiary Guaranty and all other certificates, documents or instruments delivered in connection with this Agreement as the foregoing may be amended from time to time. "Maximum Borrowing Base" means the maximum Borrowing Base in effect under this Agreement during the period commencing on April 1, 1999, and continuing until the Termination Date. The Maximum Borrowing Base shall be initially, the amount of Borrowing Base in effect on March 31, 1999; provided that such amount shall reduce on June 30, 1999 and on the last day of each March, June, September and December thereafter until the Termination Date by an amount equal to one twelfth (1/12) of the Borrowing Base in effect on March 31, 1999. "Permitted Investments" means (a) Permitted Short Term Investments (as defined in the Subordinate Notes Indenture), (b) Investments by Wiser U.S. in any Subsidiary Guarantor, (c) Investments by any Subsidiary Guarantor in any other Subsidiary Guarantor, (d) Intercompany Loans, (e) the Marketable Securities held by T.W.O.C., Inc. on June 23, 1994 and Marketable Securities thereafter acquired by T.W.O.C., Inc. with proceeds from the liquidation of Marketable Securities, and (f) other Investments; provided, that, Wiser U.S.'s and its Subsidiaries' aggregate basis in Investments made on or after September 28, 1993 which are outstanding at any time pursuant to this subject (f) shall not exceed $3,000,000 U.S. (each Borrower acknowledges that Investments by Wiser U.S. in any of its Subsidiaries since September 28, 1993 and Investments by any such Subsidiary since September 28, 1993 in any other Subsidiary of Wiser U.S., in each case excluding Investments in Subsidiary Guarantors, are considered "Investments" for purposes of this clause (f) and Section 9.8). ----------- "Termination Date" means March 31, 2002. "Wiser Canada" means The Wiser Oil Company of Canada, a Nova Scotia May 20, 1997 Page 4 unlimited liability company. 1.3 Section 2.2(b) of the Credit Agreement shall be amended to delete -------------- clause (i) thereof and to insert "(i) the amount, terms, purpose and form of such Letter of Credit are approved by Agent, such approval to not be unreasonably withheld" in place thereof. 1.4 Section 2.2(c) of the Credit Agreement shall be amended to delete the -------------- words "Consolidated Funded Debt" each time it appears in such Section and to insert in lieu thereof "Consolidated Senior Funded Debt." 1.5 Section 2.7 of the Credit Agreement shall be amended as follows: ----------- (a) Subsections (a), (b) and (c) of Section 2.7 shall be amended to ----------- delete the phrase "Subject to Section 2.7(d)" each time it appears in said -------------- section and to capitalize the initial letter in the word "Interest" each time it appears immediately following the deleted phrase "Subject to Section 2.7(d)". -------------- (b) Section 2.7 shall be amended to delete subsection (d) thereof in ----------- its entirety and to relabel the existing subsections (e) and (f) as subsections (d) and (e) respectively. 1.6 Section 2.10 of the Credit Agreement shall be amended to delete the ------------ phrase "one-fourth of one percent (1/4%)" and to substitute in its place the phrase "the Commitment Fee Percentage in effect from day to day". 1.7 Section 3.2(b) of the Credit Agreement shall be amended to delete the -------------- date "September 30, 1997" and to insert in lieu thereof the date "April 1, 1999." 1.8 Section 6.2(d) of the Credit Agreement shall be amended to delete the -------------- words "Consolidated Funded Debt" each time it appears in such Section and to insert in lieu thereof "Consolidated Senior Funded Debt." 1.9 Article VIII of the Credit Agreement shall be amended to include a new ------------ Section 8.12 which shall read in full as follows: - ------------ "Section 8.12. Subsidiary Guarantees. At any time at which any ------------ --------------------- Subsidiary of Wiser U.S. is required to execute any Guarantee of the Subordinate Notes pursuant to Section 4.13 of the Subordinate Notes Indenture, Wiser U.S. will (a) cause such Subsidiary to execute and deliver to the Banks a Subsidiary Guaranty, and (b) deliver to the Agent such (i) resolutions of the board of directors of such Subsidiary Guarantor, (ii) certificates of officers of such Subsidiary Guarantor, (iii) certificates of Governmental Authorities, and (iv) opinions of counsel, as Agent shall reasonably request to evidence the valid organization and existence of such Guarantor and the due authorization, execution, delivery and enforceability of such Subsidiary Guaranty. 1.10 Section 9.1 of the Credit Agreement shall be amended to read in full ----------- as follows: May 20, 1997 Page 5 "SECTION 9.1. Incurrence of Debt. Neither Borrower will incur, and ----------- ------------------ neither Borrower will permit any Subsidiary of Wiser U.S. to incur, any Debt if, after giving effect to such incurrence, a Borrowing Base Deficiency, an Event of Default or a Default would exist." 1.11 Section 9.2 of the Credit Agreement shall be amended to read in full ----------- as follows: "SECTION 9.2. Restrictions on Distributions. Neither Borrower will ----------- ----------------------------- directly or indirectly declare or make or incur any liability to make, and neither Borrower will permit any Subsidiary of Wiser U.S. to directly or indirectly declare or make, or incur any liability to make, Distributions in any fiscal year in excess of the greater of (i) 80% of Wiser U.S.'s Adjusted Consolidated Net Income for such fiscal year, or (ii) $4,500,000. Notwithstanding the foregoing, any Subsidiary of Wiser U.S. may make Distributions to Wiser U.S. and to any other Subsidiary of Wiser U.S. which is a Subsidiary Guarantor. Neither Borrower will enter into or become subject to, and neither Borrower will permit any Subsidiary of Wiser U.S. to enter into or become subject to, any agreement or become subject to any order of any Governmental Authority which prohibits or restricts in any way the right of any of Wiser U.S.'s Subsidiaries to make Distributions." 1.12 Section 9.13 of the Credit Agreement shall be amended to delete the ------------ last sentence of such Section. 1.13 Article IX of the Credit Agreement shall be amended to insert a new ---------- Section 9.14 which shall read in full as follows: - ------------ "SECTION 9.14. Covenants Regarding Subordinate Notes. Wiser U.S. ------------ ------------------------------------- will not, and will not permit any of its Subsidiaries to (a) prepay, redeem, repurchase or create any defeasance trust for Debt outstanding under the Subordinate Notes prior to their stated maturity, or (b) make any payment in respect of the Subordinate Notes which is prohibited pursuant to the subordination provisions applicable thereto. Notwithstanding the foregoing, Wiser U.S. will not be prohibited, solely as a result of this Section 9.14, from (x) exchanging the Subordinate Notes for Wiser U.S.'s ------------ common stock, (y) prepaying or redeeming the Subordinate Notes with the proceeds of a substantially simultaneous issue of new subordinate debt which (i) contains subordination provisions which are identical to the subordination provisions applicable to the Subordinate Notes, (ii) provides for no amortization of principal prior to maturity and provides for a final maturity no earlier than the maturity of the Subordinate Notes, (iii) bears interest at a rate (taking into account any original issue discount) no higher than the rate applicable to the Subordinate Notes, and (iv) is otherwise on terms not materially less favorable to Wiser U.S. and its Subsidiaries then the terms of the Subordinate Notes, or (z) making other prepayments or redemptions of the Subordinate Notes provided that (i) no Default exists at the time such Subordinate Notes are called for redemption or prepayment or on the effective date of such redemption or prepayment, (ii) Wiser U.S. gives Agent and each Bank notice of any such proposed prepayments or redemption at least 45 days prior to the date any notice is delivered to any holder of Subordinate Notes (or the trustee under the Indenture) May 20, 1997 Page 6 pursuant to which such Subordinate Notes are called for redemption or prepayment, (iii) upon receipt of such notice Majority Banks shall be permitted to redetermine the Borrowing Base in connection with and prior to delivery of any such call for redemption or prepayment (in accordance with the procedures set forth in Article III hereof but in addition to any redetermination of the Borrowing Base contemplated by Section 3.2), and ----------- (iv) no Borrowing Base Deficiency shall exist after giving effect to such redetermination. The Obligations constitute "Designated Senior Indebtedness" as such term is defined in the Subordinate Notes Indenture. Wiser U.S. shall not designate any other indebtedness as Designated Senior Indebtedness. Wiser U.S. will not enter into any amendment or modification of the Senior Notes Indenture. 1.14 Section 10.2 of the Credit Agreement shall be amended to read as ------------ follows: "SECTION 10.2 Ratio of Consolidated Funded Debt to Consolidated ------------ ------------------------------------------------- Tangible Net Worth of Wiser U.S. Wiser U.S.'s Consolidated Funded Debt -------------------------------- will not exceed 65% of its Consolidated Total Capital at any time. 1.15 Section 10.3 of the Credit Agreement shall be amended to read in full ------------ as follows: "SECTION 10.3 Consolidated Interests Coverage Ratio. Wiser U.S. will ------------ ------------------------------------- not permit its Consolidated Interest Coverage Ratio (as defined in the Subordinate Notes Indenture) to be less than 2.5 to 1 as of the end of any fiscal quarter. 1.16 Exhibit B, C and J to the Credit Agreement shall be amended in the ------------ - forms of Exhibits B, C and J attached to this Amendment. Section 2. Borrowing Base. The Borrowing Base is $80,000,000 and will --------- -------------- remain at $80,000,000 until it is next redetermined pursuant to Article III or ----------- Section 9.14 of the Credit Agreement. - ------------ Section 3. Elimination of CD Rate Option. Notwithstanding anything --------- ----------------------------- contained in the Credit Agreement to the contrary CD Rate Advances (including, without limitation, Refinancing CD Rate Advances) are no longer available to Borrower under the Credit Agreement. Section 4. Release of Stock Pledge. Agent hereby releases (and each Bank --------- ----------------------- hereby authorizes Agent to release) the pledge of 66% of the issued and outstanding capital stock of Wiser Canada evidenced by the Stock Pledge. Agent shall promptly return any share certificates in its possession to Wiser U.S. and will otherwise execute any additional documents reasonably required to evidence such release. Section 5. Amalgamation of Wiser Canada. Each Bank, the Agent and each --------- ---------------------------- Borrower acknowledge that The Wiser Oil Company of Canada, Ltd., an Alberta corporation ("Old Wiser Canada") was amalgamated with The Wiser Oil Company of ---------------- Canada, a Nova Scotia unlimited liability company ("New Wiser Canada") and that ---------------- no Default or Event of Default exists as a result thereof. New Wiser Canada represents, warrants and covenants that as a result of such amalgamation it (a) succeeded to all right, title and interest of Old Wiser Canada in and to all assets of Oil Wiser Canada, including, without May 20, 1997 Page 7 limitation, all Mineral Interests held by Old Wiser Canada, and (b) succeeded to and assumed (and is directly and primarily liable for) the timely observance and performance of each and every obligation of Old Wiser Canada under the Credit Agreement and each of the other Loan Papers. Each Bank, the Agent and each Borrower further acknowledge and agree that each reference in the Credit Agreement and each other Loan Paper to "The Wiser Oil Company of Canada, Ltd." or "Wiser Canada" shall be deemed a reference to New Wiser Canada. Section 6. Termination of T.W.O.C. Subordination Agreement. That certain --------- ----------------------------------------------- Subordination Agreement dated as of June 23, 1994, by and among Agent, each Bank, each Borrower and T.W.O.C., Inc. is hereby terminated effective the date hereof. T.W.O.C., Inc. has joined in this Second Amendment solely for the purpose of evidencing its consent and agreement to such termination. Section 7. Conditions Precedent. The agreements of the Banks and Agent --------- -------------------- set forth in Sections 1, 2, 4, 5 and 6 hereof are subject to and based on the Borrowers' agreements to satisfy each of the following conditions on or before the date specified (if applicable). Any failure by Borrowers to satisfy each such condition on or before the date specified shall constitute an Event of Default under and as defined in the Credit Agreement. 7.1 The Indenture under which the Subordinate Notes are issued shall be substantially the same, in form and substance, as the draft of such Indenture dated May 18, 1997, a copy of which has previously provided to Agent and the Banks. 7.2 The Canadian Term Loan shall be paid in full simultaneously with Wiser U.S.'s receipt of the proceeds of the Subordinate Notes. 7.3 Each of the following Subsidiaries of Wiser U.S. shall, simultaneously with the execution of this Second Amendment, execute and deliver Subsidiary Guarantees to Agent: The Wiser Oil Company of Canada Wiser Delaware LLC Wiser Oil Delaware, Inc. Wiser Marketing Company T.W.O.C., Inc. 7.4 Agent shall receive such (a) resolutions of the board of directors of each Borrower and the Subsidiary Guarantors, (b) certificates of officers of each Borrower and each Subsidiary Guarantor, (c) certificates of Governmental Authorities, and (d) opinions of counsel, as Agent shall reasonably request to evidence the valid organization and existence of each Borrower and each Guarantor and the due authorization, execution, delivery and enforceability of this Amendment and the Subsidiary Guaranties. The documents specified in clauses (a) through (c) of this Section 7.4 shall be delivered simultaneously ----------- with the execution and delivery of this Second Amendment and the documents specified in clause (d) shall be delivered on or before June 6, 1997. Section 8. Representations and Warranties. In order to induce Banks and --------- ------------------------------ Agent to enter into this Amendment and enter into the agreements herein contained, each Borrower hereby represents and warrants May 20, 1997 Page 8 to Agent and each Bank as follows: 8.1 Maljamar Development has conveyed to Wiser U.S. recordable title in and to all of the Mineral Interests previously held by Maljamar Development in Lea and Eddy Counties, New Mexico. After taking the conveyance of such Mineral Interests to Wiser U.S. into account, the representations and warranties of Wiser U.S. in Section 7.9 of the Credit Agreement are true and correct. 8.2 Each representation and warranty of each Borrower and each Subsidiary of Wiser U.S. contained in the Credit Agreement and the other Loan Papers is true and correct on the date hereof and will be true and correct after giving effect to this Amendment. 8.3 The execution and delivery of this Amendment and the execution and delivery by each Subsidiary Guarantor of the Subsidiary Guaranty to be executed by it, and the performance by Borrowers and the Subsidiary Guarantors of the Credit Agreement, as amended through this Amendment, such Subsidiary Guarantees and each of the other Loan Papers, are within each Borrower's and each such Subsidiary Guarantor's corporate powers, have been duly authorized by all necessary action, require no action by or in respect of, or filing with any Governmental Authority and do not violate or constitute a default under any provision of applicable Laws or any Material Agreement binding upon either Borrower or any of their respective Subsidiaries or result in the creation or imposition of any Lien upon any of the assets of either Borrower or any of their respective Subsidiaries except Permitted Encumbrances. 8.4 The Credit Agreement as amended through this Amendment constitutes the valid and binding obligation of each Borrower enforceable in accordance with its terms, except as the enforceability thereof may be limited by (a) bankruptcy, insolvency or similar laws affecting creditor's rights generally, or (b) equitable principles of general application. 8.5 Each Subsidiary Guaranty when executed and delivered by the applicable Subsidiary Guarantor, will constitute the valid and binding obligation of each such Subsidiary Guarantor enforceable in accordance with its terms, except as the enforceability thereof may be limited by (a) bankruptcy, insolvency or similar laws affecting creditor's rights generally, or (b) equitable principles of general application. 8.6 Neither Borrower has any defenses to payment, counterclaims or rights to set off with respect to the Obligations. Section 9. Miscellaneous. --------- ------------- 9.1 Upon the satisfaction of the conditions precedent set forth in Section 6 above, the Credit Agreement shall be amended and modified as herein - --------- provided, but except as so amended and modified hereby, any and all of the terms and provisions of the Credit Agreement and the Loan Papers shall remain in full force and effect. The Credit Agreement and this Amendment shall be read, taken and construed as one and the same instrument. All references to the Credit Agreement in the Loan Papers shall be deemed to mean the Credit Agreement as amended through this Amendment. 9.2 All of the terms and provisions of the Credit Agreement as amended through this May 20, 1997 Page 9 Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns. 9.3 Borrowers hereby agree to pay on demand all reasonable fees and expenses of counsel to Agent incurred by Agent, in connection with the preparation, negotiation and execution of this Amendment and all related documents. 9.4 This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when the Agent shall have received counterparts hereof signed by all of the parties hereto or, in the case of any Bank as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic or other written confirmation from such Bank of execution of a counterpart hereof by such Bank; however, no party shall be bound by this Amendment until all parties have executed a counterpart. 9.5 The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof. 9.6 THE CREDIT AGREEMENT AS AMENDED THROUGH THIS AMENDMENT AND, UNLESS OTHERWISE SPECIFIED THEREIN, ALL OF THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED STATES OF AMERICA. 9.7. Agent and Banks hereby consent to the offer, issuance and sale of the Subordinate Notes and to the execution, delivery and performance of the Subordinate Notes Indenture. 9.8 THE CREDIT AGREEMENT AS AMENDED THROUGH THIS AMENDMENT AND THE OTHER LOAN PAPERS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. [Remainder of page intentionally left blank] May 20, 1997 Page 10 Please evidence your agreement to the terms and conditions set forth above by executing this letter in the spaces indicated below and returning a fully executed copy of this letter to Agent. Very truly yours, NationsBank of Texas, N.A., as Agent and a Bank By: /s/ Dale T. Wilson ------------------------------- Its: Vice President ------------------------------- PNC Bank, N.A. By: /s/ John R. Wray ------------------------------- Its: Commercial Banking Officer ------------------------------- Accepted and Agreed this 20th day of May, 1997 The Wiser Oil Company By: /s/ Lawrence J. Finn ------------------------------------------------ Its: Vice President Finance, Chief Financial Officer ------------------------------------------------ The Wiser Oil Company of Canada By: /s/ Lawrence J. Finn ------------------------------------------------ Its: Vice President ------------------------------------------------ T.W.O.C., Inc. By: /s/ Lawrence J. Finn ------------------------------------------------ Its: Vice President ------------------------------------------------ EXHIBIT B NOTICE OF BORROWING Reference is made to that certain Credit Agreement dated as of June 23, 1994, by and among The Wiser Oil Company, a Delaware corporation ("Wiser U.S.") and The Wiser Oil Company Canada Ltd., an Alberta corporation ("Wiser Canada" and together with Wiser U.S., the "Borrowers"), certain Banks named therein (the "Banks") and NationsBank of Texas, N.A. as agent for the Banks (in such capacity, "Agent"), as amended through that certain First Amendment to Credit Agreement, dated November 29, 1995, by and among the Borrowers, Agent and the Banks and that certain Letter Agreement dated May 20, 1997 by and among Borrowers, Agent and the Banks (as same may be from time to time further amended, the "Credit Agreement"). Terms which are defined in the Credit Agreement and which are used but not defined herein are used herein with the meanings given them in the Credit Agreement. 1. Pursuant to the terms of the Credit Agreement, Wiser U.S. hereby requests each Bank to fund such Bank's Commitment Percentage of a Borrowing to be comprised of RC Advances (the "Proposed Borrowing") 2. In connection with the Proposed Borrowing, Wiser U.S. sets forth below the information required by Section 2.3 of the Credit Agreement (complete the applicable portions): (a) The Type of Rate applicable to the Proposed Borrowing is (check one): [_] Adjusted London Interbank Offered Rate. The applicable Interest Period is (check one): [_] one (1) months [_] two (2) months [_] three (3) months [_] six (6) months [_] Base Rate (b) The Borrowing Date of the Proposed Borrowing is __________, 19_____; (c) The amount of the Proposed Borrowing is $ __________ U.S.. 3. Borrower and the officer of Borrower signing this instrument hereby certify that: (a) Such officer is the duly elected, qualified and acting officer of Borrower as indicated below such officer's signature hereto; Page 1 (b) To the best knowledge of the undersigned, the representations and warranties of Borrower set forth in the Credit Agreement and the other Loan Papers delivered to Banks are true and correct on and as of the date hereof, with the same effect as though such representations and warranties had been made on and as of the date hereof or, if such representations and warranties are expressly limited to particular dates, as of such particular dates. To the best knowledge of the undersigned, no material adverse change has occurred in the business, financial condition, operations or prospects of either Borrower individually, or Wiser U.S. and its Subsidiaries, taken as a whole, since the date of the last financial reports delivered to Banks pursuant to Section 8.1 of the Credit Agreement. ----------- (c) To the best knowledge of the undersigned, there does not exist on the date hereof any condition or event which constitutes a Default, nor will any such Default exist upon Wiser U.S.'s receipt and application of the proceeds requested hereby. Borrower will use the proceeds hereby requested in compliance with the applicable provisions of the Credit Agreement. (d) To the best knowledge of the undersigned, each Borrower has performed and complied with all agreements and conditions in the Credit Agreement required to be performed or complied with by each Borrower on or prior to the date hereof, and each of the conditions precedent to making the Proposed Borrowing contained in the Credit Agreement remain satisfied in all material respects. (e) After the making of the RC Advances requested hereby, Wiser U.S.'s Consolidated Senior Funded Debt will not be in excess of the Borrowing Base on the date requested for the making of such RC Advances. IN WITNESS WHEREOF, this instrument is executed as of _____________, 19__. THE WISER OIL COMPANY, a Delaware corporation By: --------------------------------- Its: --------------------------------- Page 2 EXHIBIT C REQUEST FOR LETTER OF CREDIT Reference is made to that certain Credit Agreement dated as of June 23, 1994, by and among The Wiser Oil Company, a Delaware corporation ("Wiser U.S.") and The Wiser Oil Company Canada Ltd., an Alberta corporation ("Wiser Canada" and together with Wiser U.S., the "Borrowers"), certain Banks named therein (the "Banks") and NationsBank of Texas, N.A. as agent for the Banks (in such capacity, "Agent"), as amended through that certain First Amendment to Credit Agreement, dated November 29, 1995, by and among the Borrowers, Agent and the Banks and that certain Letter Agreement dated May 20, 1997 by and among Borrowers, Agent and the Banks (as same may be from time to time further amended, the "Credit Agreement"). Terms which are defined in the Credit Agreement and which are used but not defined herein are used herein with the meanings given them in the Credit Agreement. Pursuant to the terms of the Agreement, Wiser U.S. hereby requests _________________ ("Issuer") to issue a Letter of Credit for the account of Wiser U.S. as follows: Requested Amount $_________________ Requested Date of Issuance _______________ Requested Expiration Date _______________ Beneficiary _________________ Wiser U.S. and the officer of Wiser U.S. signing this instrument hereby certify that: (a) Such officer is the duly elected, qualified and acting officer of Wiser U.S. as indicated below such officer's signature hereto; (b) To the best knowledge of the undersigned, the representations and warranties of Wiser U.S. set forth in the Agreement and the other Loan Papers delivered to Banks are true and correct on and as of the date hereof, with the same effect as though such representations and warranties had been made on and as of the date hereof or, if such representations and warranties are expressly limited to particular dates, as of such particular dates. To the best knowledge of the undersigned, no material adverse change has occurred in the business, financial condition, operations or prospects of either Wiser U.S. individually, or Wiser U.S. and its Subsidiaries, taken as a whole, since the date of the last financial reports delivered to Banks pursuant to Section 8.1 of the Agreement. ----------- (c) To the best knowledge of the undersigned, there does not exist on the date hereof any condition or event which constitutes a Default, nor will any such Default exist upon the issuance of the Letter of Credit requested hereby. Wiser U.S. will use the Letter of Credit solely for purposes permitted by the Agreement. (d) To the best knowledge of the undersigned, Wiser U.S. has performed and complied with all agreements and conditions in the Agreement required to be performed or complied with by Wiser U.S. on or prior to the date hereof, and each of the conditions precedent to the issuance of Letters of Credit contained in the Agreement remain satisfied in all material Page 1 respects. (e) After the issuance of the Letter of Credit requested hereby, Wiser U.S.'s Consolidated Senior Funded Debt will not be in excess of the Borrowing Base on the date requested for the issuance of such Letter of Credit. IN WITNESS WHEREOF, this instrument is executed as of _____________, 19__. THE WISER OIL COMPANY, a Delaware corporation By: ------------------------------- Its: ------------------------------ Page 2 EXHIBIT J THE WISER OIL COMPANY FINANCIAL OFFICER'S CERTIFICATE The undersigned _________________ of The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), hereby (a) delivers this Certificate pursuant to Section 8.1(d) of that certain Credit Agreement ("Credit Agreement") dated June - -------------- 23, 1994, by and among Wiser U.S. and The Wiser Oil Company Canada Ltd., as Borrowers, NationsBank of Texas, N.A. as Agent ("Agent"), and the financial institutions listed on the signature pages thereto, as Banks (the "Banks"), and (b) certifies to the Banks, with the knowledge and intent that the Banks may, without any independent investigation, rely fully on the matters herein in connection with the Credit Agreement, as follows: 1. Attached hereto as Exhibit A are the consolidated and consolidating financial statements of (a) [_] Wiser U.S. and its Subsidiaries as of and for the fiscal [_]year [_]quarter (check one) ended _____________, 19____, (b) [_] Wiser Canada as of and for the fiscal quarter ended _____________, 19____ (check one). 2. As of the date of such financial statements, Wiser U.S.'s ratio of Consolidated Current Assets to Adjusted Consolidated Current Liabilities was ______ to 1.0, as evidenced by the following calculations: Consolidated Current Assets (per Credit Agreement) $_______________ Consolidated Current Liabilities $_________________ Less: Long Term Debt ($________________) ----------------- Adjusted Consolidated Current Liabilities (per Credit Agreement)$_______________ Consolidated Current Assets $ - --------------------------------- = --------------- = -------- Adjusted Consolidated Current Liabilities $ 1.0 3. As of the date of such financial statements, Wiser U.S.'s Consolidated Funded Debt was _____% of Wiser U.S.'s Consolidated Total Capital, as evidenced by the following calculations: Consolidated Funded Debt $_______________ Consolidated Liabilities $________________ Plus: Consolidated Shareholders Equity ($________________) ------------------- Consolidated Total Capital $_______________ Consolidated Funded Debt $ - ------------------- = ------------- = ------------ _______________% Consolidated Total Capital $ 1.0 4. For the period of four fiscal quarters ending on the date of such financial statements Wiser U.S.'s Consolidated Interest Coverage Ratio (as defined in the Subordinate Notes Indenture) was _________ to 1. 5. As of the date of such financial statements, the Adjusted Market Value of all Marketable Securities held by Wiser U.S. and its Consolidated Subsidiaries was $_______. 6. As of the date of such financial statements, the aggregate amount of all net gas imbalances under all Gas Balancing Agreements to which Wiser U.S. or any of its Subsidiaries are parties, or by which any Mineral Interests owned by Wiser U.S. or any of its Subsidiaries are bound, is approximately $___________. 7. As of the date of such financial statements, the aggregate amount of all Advance Payments received under all Advance Payment Contracts to which Wiser U.S. or any of its Subsidiaries are parties, or by which any Mineral Interests owned by Wiser U.S. or any of its Subsidiaries are bound, which have not been satisfied by delivery of production, is approximately $______________. 8. Such financial statements are true and correct in all material respects, have been prepared on a consistent basis in accordance with GAAP (except as otherwise noted therein) and fairly present, on a consolidated basis, the financial condition of Wiser U.S. and its Subsidiaries (or Wiser Canada and its Subsidiaries in the case of the financial statements delivered pursuant to Section 8.1(c) of the Credit Agreement) as of the respective dates indicated - -------------- therein and the results of operations for the respective periods indicated therein. 9. As of the date of such financial statements, neither Wiser U.S. nor any of its Subsidiaries (or Wiser Canada and its Subsidiaries in the case of the financial statements delivered pursuant to Section 8.1(c) of the Credit -------------- Agreement) had any liabilities or obligations (absolute, accrued, contingent or otherwise) of a nature required by GAAP to be reflected in such financial statements which are, individually or in the aggregate, material to the condition, financial or otherwise, or operations of Wiser U.S. and its Subsidiaries (or Wiser Canada and its Subsidiaries in the case of the financial statements delivered pursuant to Section 8.1(c) of the Credit Agreement) on a -------------- consolidated basis as of that date, which are not reflected on such financial statements. 10. Unless otherwise disclosed on Exhibit B attached hereto and incorporated herein by reference for all purposes, neither a Default nor an Event of Default has occurred which is in existence on the date hereof. Provided, that for any Default or Event of Default disclosed on Exhibit B attached hereto, the Borrowers are taking or propose to take the action to cure such Default or Event of Default set forth on Exhibit B. Unless otherwise defined herein, all capitalized terms used herein shall have the meaning given such terms in the Credit Agreement. IN WITNESS WHEREOF, the undersigned has duly executed this Financial Officer's Certificate as of _______________________, 19___. THE WISER OIL COMPANY, a Delaware corporation By: -------------------------------- Its: ------------------------------- EX-4.7 6 GUARANTY--WISER OIL DELAWARE, INC. EXHIBIT 4.7 GUARANTY THIS GUARANTY (this "Guaranty") is dated as of the 20th day of May, 1997, -------- by WISER OIL DELAWARE, INC., a Delaware corporation ("Guarantor"), in favor of --------- NATIONSBANK OF TEXAS, N.A. and PNC BANK, NATIONAL ASSOCIATION (NationsBank of Texas, N.A. acting as a Bank but not as Agent, and PNC Bank, National Association, and each of their successors and assigns are collectively referred to herein as "Noteholders"). ----------- W I T N E S S E T H: ------------------- WHEREAS, The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), The ---------- Wiser Oil Company of Canada, a Nova Scotia unlimited liability company, formerly known as The Wiser Oil Company Canada Ltd. ("Wiser Canada," and together with ------------ Wiser U.S., collectively referred to herein as "Borrowers"), Noteholders, and --------- NationsBank of Texas, N.A., as Agent ("Agent") are parties to that certain ----- Credit Agreement dated as of June 23, 1994 (as amended through the date hereof, the "Credit Agreement"), pursuant to which Noteholders have provided Wiser U.S. ---------------- with a revolving credit facility and Wiser Canada with a term credit facility (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrowers have requested that the Agent and Noteholders enter into a letter agreement of even date herewith (the "Second Amendment") pursuant to ---------------- which the Credit Agreement will be amended in certain respects; and WHEREAS, Banks have required as a condition to entering into the Second Amendment, that Guarantor execute and deliver this Guaranty; and WHEREAS, Guarantor has determined that valuable benefits, either directly or indirectly, will be derived by it as a result of the Second Amendment and the extension of credit to be made by Noteholders under the Credit Agreement as amended by the Second Amendment; and WHEREAS, Guarantor has further determined that the benefits accruing to it from the Credit Agreement as amended by the Second Amendment exceed Guarantor's anticipated liability under this Guaranty. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Guarantor hereby covenants and agrees as follows: 1. Guarantor hereby absolutely and unconditionally guarantees the prompt, complete and full payment when due, no matter how such shall become due, of the Guaranteed Debt (as hereinafter defined), and further guarantees that Wiser U.S. will properly and timely perform each and all of the Obligations. This Guaranty shall remain in effect until the Guaranteed Debt is fully 1 paid and performed. Guarantor may not rescind or revoke its obligations with respect to this Guaranty and the Guaranteed Debt. Notwithstanding any contrary provision in this Guaranty, however, the maximum liability of Guarantor under this Guaranty shall not exceed the Maximum Liability Amount (as hereinafter defined). As used herein, the term "Guaranteed Debt" means the Obligations, as --------------- defined in the Credit Agreement, and all present and future costs, attorneys' fees and expenses reasonably incurred by each of the Noteholders to enforce Wiser U.S.'s, any guarantor's (including Guarantor's), or any other obligor's payment of any of the Obligations, including, without limitation (to the extent lawful) all present and future accrued and unpaid interest (including, without limitation, all post-petition interest if Wiser U.S. or any Subsidiary voluntarily or involuntarily becomes subject to any Debtor Relief Law). As used herein, the term "Debtor Relief Law" means the Bankruptcy Code of the United ----------------- States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar laws affecting creditor's rights. As used herein, the term "Maximum Liability Amount" means $1.00 less than the amount of ------------------------ the lowest claim on this Guaranty which would render it void or voidable under any Debtor Relief Law as against Guarantor. 2. If Guarantor is or becomes liable for any indebtedness owing by Wiser U.S. to any Noteholder by endorsement or otherwise than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of each Noteholder hereunder shall be cumulative of any and all other rights that each Noteholder may ever have against Guarantor. The exercise by any Noteholder of any right or remedy hereunder or under any other instrument, at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 3. In the event of default by Wiser U.S. in payment of the Guaranteed Debt, or any part thereof, when such Guaranteed Debt becomes due, either by its terms or as the result of the exercise of any power to accelerate, Guarantor shall, on demand, and without further notice of dishonor and without any notice having been given to Guarantor previous to such demand of the acceptance by each Noteholder of this Guaranty, and without any notice having been given to such Guarantor previous to such demand of the creating or incurring of such Guaranteed Debt, pay the amount due thereon to each Noteholder at Agent's office as set forth in the Credit Agreement, and it shall not be necessary for any Noteholder, in order to enforce such payment by Guarantor, first, to institute suit or exhaust its remedies against Wiser U.S. or others liable on such Guaranteed Debt, to have Wiser U.S. joined with Guarantor in any suit brought under this Guaranty or to enforce its rights against any security which shall ever have been given to secure such indebtedness; provided, however, that in the event any Noteholder elects to enforce and/or exercise any remedies it may possess with respect to any security for the Guaranteed Debt prior to demanding payment from Guarantor, Guarantor shall nevertheless be obligated hereunder for any and all sums still owing to any of the Noteholders on the Guaranteed Debt and not repaid or recovered incident to the exercise of such remedies. 4. Notice to Guarantor of the acceptance of this Guaranty and of the making, renewing or assignment of the Guaranteed Debt and each item thereof, are hereby expressly 2 waived by Guarantor. 5. Each payment on the Guaranteed Debt shall be deemed to have been made by Wiser U.S. unless express written notice is given to each Noteholder at the time of such payment that such payment is made by Guarantor as specified in such notice. 6. If all or any part of the Guaranteed Debt at any time be secured, Guarantor agrees that Agent and/or any Noteholder may at any time and from time to time, at its discretion and with or without valuable consideration, allow substitution or withdrawal of collateral or other security and release collateral or other security or compromise or settle any amount due or owing under the Credit Agreement or amend or modify in whole or in part the Credit Agreement or any Loan Paper executed in connection with same without impairing or diminishing the obligations of Guarantor hereunder. Guarantor further agrees that if Wiser U.S. executes in favor of any Noteholder any collateral agreement, mortgage or other security instrument, the exercise by any Noteholder of any right or remedy thereby conferred on any such Noteholder shall be wholly discretionary with such Noteholder, and that the exercise or failure to exercise any such right or remedy shall in no way impair or diminish the obligations of Guarantor hereunder. Guarantor further agrees that none of the Noteholders nor Agent shall be liable for its failure to use diligence in the collection of the Guaranteed Debt or in preserving the liability of any Person liable for the Guaranteed Debt, and Guarantor hereby waives presentment for payment, notice of nonpayment, protest and notice thereof (including, notice of acceleration), and diligence in bringing suits against any Person liable on the Guaranteed Debt, or any part thereof. 7. Guarantor agrees that any Noteholder, in its discretion, may (i) bring suit against all guarantors (including, without limitation, Guarantor hereunder) of the Guaranteed Debt jointly and severally or against any one or more of them, (ii) compound or settle with any one or more of such guarantors for such consideration as Noteholders may deem proper, and (iii) release one or more of such guarantors from liability hereunder, and that no such action shall impair the rights of any such Noteholder to collect the Guaranteed Debt (or the unpaid balance thereof) from other such guarantors of the Guaranteed Debt, or any of them, not so sued, settled with or released. Guarantor agrees, however, that nothing contained in this paragraph, and no action by any Noteholder permitted under this paragraph, shall in any way affect or impair the rights or obligations of such guarantors among themselves. 8. Guarantor represents and warrants to each Noteholder that (i) Guarantor is a corporation, partnership or limited liability company (as applicable) duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation; (ii) Guarantor possesses all requisite authority and power to authorize, execute, deliver and comply with the terms of this Guaranty; (iii) this Guaranty has been duly authorized and approved by all necessary action on the part of Guarantor and constitutes a valid and binding obligation of Guarantor enforceable in accordance with its terms, except as (a) the enforcement thereof may be limited by applicable Debtor Relief Laws, and (b) the availability of equitable remedies may be limited by equitable principles of general applicability; (iv) no approval or consent of any court or Governmental Authority is required for the authorization, execution, delivery or compliance with 3 this Guaranty which has not been obtained (and copies thereof delivered to Agent and each Noteholder); and (v) Guarantor is not involved in, nor aware of the threat of, any Litigation (as defined in Paragraph 23(a) hereinbelow) which, in --------------- the event of an outcome unfavorable to Guarantor, could have a material adverse effect on the financial position, business, operations or prospects of Guarantor nor are there any outstanding or unpaid judgments against Guarantor. Guarantor further acknowledges that certain (A) representations and warranties in the Credit Agreement are applicable to it and confirms that each such representation and warranty is true and correct in all material respects, and (B) covenants and other provisions in the Credit Agreement are applicable to it or are imposed upon it and agrees to promptly comply with or be bound by each of them. 9. Guarantor covenants and agrees that until the Guaranteed Debt is paid and performed in full, except as otherwise provided in the Credit Agreement or unless each Noteholder gives its prior written consent to any deviation therefrom, it will (i) at all times maintain its existence and authority to transact business in any State or jurisdiction where Guarantor has assets and operations, (ii) promptly deliver to any Noteholder and to Agent such information respecting its business affairs, assets and liabilities as any Noteholder may reasonably request, and (iii) duly and punctually observe and perform all covenants applicable to Guarantor under the Credit Agreement and the other Loan Papers. 10. This Guaranty is for the benefit of each Noteholder, its successors and assigns, and in the event of an assignment by any Noteholder (or its successors or assigns) of the Guaranteed Debt, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Debt so assigned, may be transferred with such Guaranteed Debt. This Guaranty is binding upon Guarantor and its legal representatives, successors and assigns. 11. No modification, consent, amendment or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by each Noteholder, and then shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor to any other or further notice or demand in similar or other circumstances. No delay or omission by any Noteholder in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. All rights and remedies of each Noteholder hereunder are cumulative of each other and of every other right or remedy which any of the Noteholders may otherwise have at law or in equity or under any other contract or document, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 12. No provision herein or in any promissory note, instrument or any other Loan Paper executed by either Borrower or Guarantor evidencing the Guaranteed Debt shall require the payment or permit the collection of interest in excess of the Maximum Lawful Rate. If any excess of interest in such respect is provided for herein or in any such promissory note, 4 instrument, or any other Loan Paper, the provisions of this paragraph shall govern, and none of the Borrowers nor Guarantor shall be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted by law. The intention of the parties being to conform strictly to any applicable federal or state usury laws now in force, all promissory notes, instruments and other Loan Papers executed by Borrowers or Guarantor evidencing the Guaranteed Debt shall be held subject to reduction to the amount allowed under said usury laws as now or hereafter construed by the courts having jurisdiction. 13. If Guarantor should breach or fail to perform any provision of this Guaranty, Guarantor agrees to pay each Noteholder all costs and expenses (including court costs and reasonable attorneys fees) incurred by such Noteholder in the enforcement hereof. 14. (a) The liability of Guarantor under this Guaranty shall in no manner be impaired, affected or released by the insolvency, bankruptcy, making of an assignment for the benefit of creditors, arrangement, compensation, composition or readjustment of either Borrower, or any proceedings affecting the status, existence or assets of either Borrower or other similar proceedings instituted by or against either Borrower and affecting the assets of either Borrower. Furthermore, no obligations of Guarantor under this Guaranty may be released, diminished or affected by the occurrence of any one or more of the following events: (a) any taking or accepting of any other security or assurance for any Guaranteed Debt; (b) any release, surrender, exchange, subordination, impairment or loss of any collateral securing any Guaranteed Debt; (c) any full or partial release of the liability of any other guarantor or any other obligor on the Guaranteed Debt; (d) the modification of, or waiver of compliance with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy or lack of corporate, partnership or limited liability company (as applicable) power of Guarantor or any other obligor at any time liable for any of the Guaranteed Debt, whether now existing or occurring in the future; (f) any renewal, extension or rearrangement of any Guaranteed Debt or any adjustment, indulgence, forbearance, or compromise that may be granted or given by any Noteholder to any guarantor (including Guarantor) or any other obligor on the Guaranteed Debt; (g) any neglect, delay, omission, failure or refusal of any Noteholder to take or prosecute any action in connection with the Guaranteed Debt; (h) any failure of any Noteholder to notify Guarantor of any renewal, extension, or assignment of any Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by any Noteholder against Wiser U.S. or any new agreement between any Noteholder and Wiser U.S., it being understood that none of the Noteholders nor Agent are required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with any Guaranteed Debt, other than any notice required to be given to Guarantor by law or elsewhere in this Guaranty; (i) the unenforceability of any Guaranteed Debt against Guarantor or any other obligor because it exceeds the amount permitted by law, the act of creating it is ultra vires, the officers creating ----------- it exceeded their authority or violated their fiduciary duties in connection with it, or otherwise; or (j) any payment of the Guaranteed Debt to any Noteholder or Agent is held to constitute a preference under any Debtor Relief Law or for any other reason any Noteholder is required to refund that payment or make payment to someone else (and in each such instance this Guaranty will be reinstated in an amount equal to that payment). 5 (b) Guarantor acknowledges and agrees that any interest on any portion of the Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Obligations if said proceedings had not been commenced) shall be included in the Guaranteed Debt because it is the intention of Guarantor, Agent and Noteholders that the Guaranteed Debt which is guaranteed by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Wiser U.S. of any portion of such Guaranteed Debt. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Noteholders or Agent, or allow the claim of Noteholders or Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Debt is paid by Borrowers or any other obligor, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Agent or any Noteholder as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Debt for all purposes under this Guaranty. 15. Guarantor understands and agrees that any amounts of Guarantor on account with any Noteholder may be offset to satisfy the obligations of Guarantor hereunder. 16. Guarantor hereby subordinates and makes inferior any and all indebtedness now or at any time hereafter owed by Wiser U.S. to Guarantor to the Guaranteed Debt evidenced by the Credit Agreement and agrees after the occurrence of an Event of Default under the Credit Agreement, not to permit either Borrower to repay, or to accept payment from either Borrower of, such indebtedness or any part thereof without the prior written consent of each Noteholder. 17. Guarantor hereby waives any and all rights of subrogation to which Guarantor may otherwise be entitled against Wiser U.S., or any other guarantor of the Guaranteed Debt, as a result of any payment made by Guarantor pursuant to this Guaranty. 18. As of the date hereof (i) the fair value of the property of Guarantor is greater than the total amount of liabilities including, without limitation, contingent liabilities, of Guarantor, (ii) the present fair saleable value of the assets of Guarantor (including, without limitation, intangible assets such as goodwill) is not less than the amount that will be required to pay the probable liability of Guarantor on its debts as they become absolute and matured, (iii) Guarantor is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) Guarantor does not intend to, nor does Guarantor believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (v) Guarantor is not engaged in a business or transaction, nor is Guarantor about to engage in a business or transaction for which its property would constitute unreasonably small capital after giving due consideration to the prevailing 6 practice in the industry in which Guarantor is engaged. For purposes of this Section 18, "contingent liabilities" shall be computed at the amount which, in - ---------- light of all relevant facts and circumstances, represents the amount that can reasonably be expected to become an actual or matured liability. 19. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Papers and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Wiser U.S.'s creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by any Noteholder as to that creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Wiser U.S. and any circumstances affecting Wiser U.S.'s ability to perform under the Loan Papers to which is a party or any collateral securing any Guaranteed Debt. 20. The Guaranteed Debt may not be reduced, discharged or released because or by reason of any existing or future offset, claim, or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Wiser U.S. or any other obligor against any Noteholder or against payment of the Guaranteed Debt, whether that offset, claim or defense arises in connection with the Guaranteed Debt or otherwise. Those claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability, accord and satisfaction, usury, forged signatures, mistake, impossibility, frustration of purpose, and unconscionability. 21. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar writing) and shall be given to such party at its address, telex or telecopy number set forth, in the case of any Noteholder, on the signature pages of the Credit Agreement, or, in the case of Guarantor, on the signature pages hereof, or such other address, telex or telecopy number as such party may hereafter specify for the purpose by notice to the other party. Each such notice, request or other communication shall be effective (a) if given by telex or telecopy, when such telex or telecopy is transmitted to the telex or telecopy number specified in this Section 21 and the appropriate answer back is received or receipt is ---------- otherwise confirmed, (ii) if given by mail, three (3) Domestic Business Days (as defined in the Credit Agreement) after deposit in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified in this Section 21. ---------- 22. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable, such provision shall be fully severable; this Guaranty shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Guaranty a provision as similar in terms to such illegal, invalid, or unenforceable provision as 7 may be possible and be legal, valid and enforceable. 23. (a) Except to the extent required for the exercise of the remedies provided in the other security instruments, Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of any Texas state or federal court over any action or proceeding arising out of or relating to this Guaranty or any other Loan Paper, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas state or federal court. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Litigation arising out of or in connection with this Guaranty or any of the Loan Papers brought in district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Guarantor hereby irrevocably waives any claim that any Litigation brought in any such court has been brought in an inconvenient forum. Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such Litigation by the mailing of copies thereof by certified mail, return receipt requested, postage prepaid, to Guarantor's office at the address set forth on the signature page hereof. Guarantor irrevocably agrees that any legal proceeding against Noteholders shall be brought in the district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Nothing herein shall affect the right of any Noteholder to commence legal proceedings or otherwise proceed against Guarantor in any jurisdiction or to serve process in any manner permitted by applicable law. As used herein, the term "Litigation" means any ---------- proceeding, claim, lawsuit or investigation (i) conducted or threatened by or before any court or governmental department, commission, board, bureau, agency or instrumentality of the United States or of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted or existing, or (ii) pending before any public or private arbitration board or panel. (b) Nothing in this Paragraph 23 shall affect any right of any ------------ Noteholder to serve legal process in any other manner permitted by law or affect the right of any Noteholder to bring any action or proceeding against Guarantor in the courts of any other jurisdictions. (c) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and the other Loan Papers. 24. THIS GUARANTY AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG NOTEHOLDERS, AGENT AND GUARANTOR AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF NOTEHOLDERS, AGENT AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG NOTEHOLDERS, AGENT AND GUARANTOR. 8 25. GUARANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT TO A JURY TRIAL, IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN PAPERS. 26. THIS GUARANTY AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. EXECUTED and effective as of the date first above written. GUARANTOR: WISER OIL DELAWARE, INC. By: /s/ Lawrence J. Finn ------------------------------- Name: Lawrence J. Finn ----------------------------- Title: Vice President ---------------------------- Address: Wiser Oil Delaware, Inc. 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Chief Financial Officer Fax No. (214) 373-3610 9 EX-4.8 7 GUARANTY--WISER DELAWARE LLC EXHIBIT 4.8 GUARANTY THIS GUARANTY (this "Guaranty") is dated as of the 20th day of May, 1997, -------- by WISER DELAWARE LLC, a Delaware limited liability company ("Guarantor"), in --------- favor of NATIONSBANK OF TEXAS, N.A. and PNC BANK, NATIONAL ASSOCIATION (NationsBank of Texas, N.A. acting as a Bank but not as Agent, and PNC Bank, National Association, and each of their successors and assigns are collectively referred to herein as "Noteholders"). ----------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), The ---------- Wiser Oil Company of Canada, a Nova Scotia unlimited liability company, formerly known as The Wiser Oil Company Canada Ltd. ("Wiser Canada," and together with ------------ Wiser U.S., collectively referred to herein as "Borrowers"), Noteholders, and --------- NationsBank of Texas, N.A., as Agent ("Agent") are parties to that certain ----- Credit Agreement dated as of June 23, 1994 (as amended through the date hereof, the "Credit Agreement"), pursuant to which Noteholders have provided Wiser U.S. ---------------- with a revolving credit facility and Wiser Canada with a term credit facility (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrowers have requested that the Agent and Noteholders enter into a letter agreement of even date herewith (the "Second Amendment") pursuant to ---------------- which the Credit Agreement will be amended in certain respects; and WHEREAS, Banks have required as a condition to entering into the Second Amendment, that Guarantor execute and deliver this Guaranty; and WHEREAS, Guarantor has determined that valuable benefits, either directly or indirectly, will be derived by it as a result of the Second Amendment and the extension of credit to be made by Noteholders under the Credit Agreement as amended by the Second Amendment; and WHEREAS, Guarantor has further determined that the benefits accruing to it from the Credit Agreement as amended by the Second Amendment exceed Guarantor's anticipated liability under this Guaranty. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Guarantor hereby covenants and agrees as follows: 1. Guarantor hereby absolutely and unconditionally guarantees the prompt, complete and full payment when due, no matter how such shall become due, of the Guaranteed Debt (as hereinafter defined), and further guarantees that Wiser U.S. will properly and timely perform each and all of the Obligations. This Guaranty shall remain in effect until the Guaranteed Debt is fully 1 paid and performed. Guarantor may not rescind or revoke its obligations with respect to this Guaranty and the Guaranteed Debt. Notwithstanding any contrary provision in this Guaranty, however, the maximum liability of Guarantor under this Guaranty shall not exceed the Maximum Liability Amount (as hereinafter defined). As used herein, the term "Guaranteed Debt" means the Obligations, as --------------- defined in the Credit Agreement, and all present and future costs, attorneys' fees and expenses reasonably incurred by each of the Noteholders to enforce Wiser U.S.'s, any guarantor's (including Guarantor's), or any other obligor's payment of any of the Obligations, including, without limitation (to the extent lawful) all present and future accrued and unpaid interest (including, without limitation, all post-petition interest if Wiser U.S. or any Subsidiary voluntarily or involuntarily becomes subject to any Debtor Relief Law). As used herein, the term "Debtor Relief Law" means the Bankruptcy Code of the United ----------------- States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar laws affecting creditor's rights. As used herein, the term "Maximum Liability Amount" means $1.00 less than the amount of ------------------------ the lowest claim on this Guaranty which would render it void or voidable under any Debtor Relief Law as against Guarantor. 2. If Guarantor is or becomes liable for any indebtedness owing by Wiser U.S. to any Noteholder by endorsement or otherwise than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of each Noteholder hereunder shall be cumulative of any and all other rights that each Noteholder may ever have against Guarantor. The exercise by any Noteholder of any right or remedy hereunder or under any other instrument, at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 3. In the event of default by Wiser U.S. in payment of the Guaranteed Debt, or any part thereof, when such Guaranteed Debt becomes due, either by its terms or as the result of the exercise of any power to accelerate, Guarantor shall, on demand, and without further notice of dishonor and without any notice having been given to Guarantor previous to such demand of the acceptance by each Noteholder of this Guaranty, and without any notice having been given to such Guarantor previous to such demand of the creating or incurring of such Guaranteed Debt, pay the amount due thereon to each Noteholder at Agent's office as set forth in the Credit Agreement, and it shall not be necessary for any Noteholder, in order to enforce such payment by Guarantor, first, to institute suit or exhaust its remedies against Wiser U.S. or others liable on such Guaranteed Debt, to have Wiser U.S. joined with Guarantor in any suit brought under this Guaranty or to enforce its rights against any security which shall ever have been given to secure such indebtedness; provided, however, that in the event any Noteholder elects to enforce and/or exercise any remedies it may possess with respect to any security for the Guaranteed Debt prior to demanding payment from Guarantor, Guarantor shall nevertheless be obligated hereunder for any and all sums still owing to any of the Noteholders on the Guaranteed Debt and not repaid or recovered incident to the exercise of such remedies. 4. Notice to Guarantor of the acceptance of this Guaranty and of the making, renewing or assignment of the Guaranteed Debt and each item thereof, are hereby expressly 2 waived by Guarantor. 5. Each payment on the Guaranteed Debt shall be deemed to have been made by Wiser U.S. unless express written notice is given to each Noteholder at the time of such payment that such payment is made by Guarantor as specified in such notice. 6. If all or any part of the Guaranteed Debt at any time be secured, Guarantor agrees that Agent and/or any Noteholder may at any time and from time to time, at its discretion and with or without valuable consideration, allow substitution or withdrawal of collateral or other security and release collateral or other security or compromise or settle any amount due or owing under the Credit Agreement or amend or modify in whole or in part the Credit Agreement or any Loan Paper executed in connection with same without impairing or diminishing the obligations of Guarantor hereunder. Guarantor further agrees that if Wiser U.S. executes in favor of any Noteholder any collateral agreement, mortgage or other security instrument, the exercise by any Noteholder of any right or remedy thereby conferred on any such Noteholder shall be wholly discretionary with such Noteholder, and that the exercise or failure to exercise any such right or remedy shall in no way impair or diminish the obligations of Guarantor hereunder. Guarantor further agrees that none of the Noteholders nor Agent shall be liable for its failure to use diligence in the collection of the Guaranteed Debt or in preserving the liability of any Person liable for the Guaranteed Debt, and Guarantor hereby waives presentment for payment, notice of nonpayment, protest and notice thereof (including, notice of acceleration), and diligence in bringing suits against any Person liable on the Guaranteed Debt, or any part thereof. 7. Guarantor agrees that any Noteholder, in its discretion, may (i) bring suit against all guarantors (including, without limitation, Guarantor hereunder) of the Guaranteed Debt jointly and severally or against any one or more of them, (ii) compound or settle with any one or more of such guarantors for such consideration as Noteholders may deem proper, and (iii) release one or more of such guarantors from liability hereunder, and that no such action shall impair the rights of any such Noteholder to collect the Guaranteed Debt (or the unpaid balance thereof) from other such guarantors of the Guaranteed Debt, or any of them, not so sued, settled with or released. Guarantor agrees, however, that nothing contained in this paragraph, and no action by any Noteholder permitted under this paragraph, shall in any way affect or impair the rights or obligations of such guarantors among themselves. 8. Guarantor represents and warrants to each Noteholder that (i) Guarantor is a corporation, partnership or limited liability company (as applicable) duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation; (ii) Guarantor possesses all requisite authority and power to authorize, execute, deliver and comply with the terms of this Guaranty; (iii) this Guaranty has been duly authorized and approved by all necessary action on the part of Guarantor and constitutes a valid and binding obligation of Guarantor enforceable in accordance with its terms, except as (a) the enforcement thereof may be limited by applicable Debtor Relief Laws, and (b) the availability of equitable remedies may be limited by equitable principles of general applicability; (iv) no approval or consent of any court or Governmental Authority is required for the authorization, execution, delivery or compliance with 3 this Guaranty which has not been obtained (and copies thereof delivered to Agent and each Noteholder); and (v) Guarantor is not involved in, nor aware of the threat of, any Litigation (as defined in Paragraph 23(a) hereinbelow) which, in --------------- the event of an outcome unfavorable to Guarantor, could have a material adverse effect on the financial position, business, operations or prospects of Guarantor nor are there any outstanding or unpaid judgments against Guarantor. Guarantor further acknowledges that certain (A) representations and warranties in the Credit Agreement are applicable to it and confirms that each such representation and warranty is true and correct in all material respects, and (B) covenants and other provisions in the Credit Agreement are applicable to it or are imposed upon it and agrees to promptly comply with or be bound by each of them. 9. Guarantor covenants and agrees that until the Guaranteed Debt is paid and performed in full, except as otherwise provided in the Credit Agreement or unless each Noteholder gives its prior written consent to any deviation therefrom, it will (i) at all times maintain its existence and authority to transact business in any State or jurisdiction where Guarantor has assets and operations, (ii) promptly deliver to any Noteholder and to Agent such information respecting its business affairs, assets and liabilities as any Noteholder may reasonably request, and (iii) duly and punctually observe and perform all covenants applicable to Guarantor under the Credit Agreement and the other Loan Papers. 10. This Guaranty is for the benefit of each Noteholder, its successors and assigns, and in the event of an assignment by any Noteholder (or its successors or assigns) of the Guaranteed Debt, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Debt so assigned, may be transferred with such Guaranteed Debt. This Guaranty is binding upon Guarantor and its legal representatives, successors and assigns. 11. No modification, consent, amendment or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by each Noteholder, and then shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor to any other or further notice or demand in similar or other circumstances. No delay or omission by any Noteholder in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. All rights and remedies of each Noteholder hereunder are cumulative of each other and of every other right or remedy which any of the Noteholders may otherwise have at law or in equity or under any other contract or document, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 12. No provision herein or in any promissory note, instrument or any other Loan Paper executed by either Borrower or Guarantor evidencing the Guaranteed Debt shall require the payment or permit the collection of interest in excess of the Maximum Lawful Rate. If any excess of interest in such respect is provided for herein or in any such promissory note, 4 instrument, or any other Loan Paper, the provisions of this paragraph shall govern, and none of the Borrowers nor Guarantor shall be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted by law. The intention of the parties being to conform strictly to any applicable federal or state usury laws now in force, all promissory notes, instruments and other Loan Papers executed by Borrowers or Guarantor evidencing the Guaranteed Debt shall be held subject to reduction to the amount allowed under said usury laws as now or hereafter construed by the courts having jurisdiction. 13. If Guarantor should breach or fail to perform any provision of this Guaranty, Guarantor agrees to pay each Noteholder all costs and expenses (including court costs and reasonable attorneys fees) incurred by such Noteholder in the enforcement hereof. 14. (a) The liability of Guarantor under this Guaranty shall in no manner be impaired, affected or released by the insolvency, bankruptcy, making of an assignment for the benefit of creditors, arrangement, compensation, composition or readjustment of either Borrower, or any proceedings affecting the status, existence or assets of either Borrower or other similar proceedings instituted by or against either Borrower and affecting the assets of either Borrower. Furthermore, no obligations of Guarantor under this Guaranty may be released, diminished or affected by the occurrence of any one or more of the following events: (a) any taking or accepting of any other security or assurance for any Guaranteed Debt; (b) any release, surrender, exchange, subordination, impairment or loss of any collateral securing any Guaranteed Debt; (c) any full or partial release of the liability of any other guarantor or any other obligor on the Guaranteed Debt; (d) the modification of, or waiver of compliance with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy or lack of corporate, partnership or limited liability company (as applicable) power of Guarantor or any other obligor at any time liable for any of the Guaranteed Debt, whether now existing or occurring in the future; (f) any renewal, extension or rearrangement of any Guaranteed Debt or any adjustment, indulgence, forbearance, or compromise that may be granted or given by any Noteholder to any guarantor (including Guarantor) or any other obligor on the Guaranteed Debt; (g) any neglect, delay, omission, failure or refusal of any Noteholder to take or prosecute any action in connection with the Guaranteed Debt; (h) any failure of any Noteholder to notify Guarantor of any renewal, extension, or assignment of any Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by any Noteholder against Wiser U.S. or any new agreement between any Noteholder and Wiser U.S., it being understood that none of the Noteholders nor Agent are required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with any Guaranteed Debt, other than any notice required to be given to Guarantor by law or elsewhere in this Guaranty; (i) the unenforceability of any Guaranteed Debt against Guarantor or any other obligor because it exceeds the amount permitted by law, the act of creating it is ultra vires, the officers creating ----------- it exceeded their authority or violated their fiduciary duties in connection with it, or otherwise; or (j) any payment of the Guaranteed Debt to any Noteholder or Agent is held to constitute a preference under any Debtor Relief Law or for any other reason any Noteholder is required to refund that payment or make payment to someone else (and in each such instance this Guaranty will be reinstated in an amount equal to that payment). 5 (b) Guarantor acknowledges and agrees that any interest on any portion of the Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Obligations if said proceedings had not been commenced) shall be included in the Guaranteed Debt because it is the intention of Guarantor, Agent and Noteholders that the Guaranteed Debt which is guaranteed by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Wiser U.S. of any portion of such Guaranteed Debt. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Noteholders or Agent, or allow the claim of Noteholders or Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Debt is paid by Borrowers or any other obligor, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Agent or any Noteholder as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Debt for all purposes under this Guaranty. 15. Guarantor understands and agrees that any amounts of Guarantor on account with any Noteholder may be offset to satisfy the obligations of Guarantor hereunder. 16. Guarantor hereby subordinates and makes inferior any and all indebtedness now or at any time hereafter owed by Wiser U.S. to Guarantor to the Guaranteed Debt evidenced by the Credit Agreement and agrees after the occurrence of an Event of Default under the Credit Agreement, not to permit either Borrower to repay, or to accept payment from either Borrower of, such indebtedness or any part thereof without the prior written consent of each Noteholder. 17. Guarantor hereby waives any and all rights of subrogation to which Guarantor may otherwise be entitled against Wiser U.S., or any other guarantor of the Guaranteed Debt, as a result of any payment made by Guarantor pursuant to this Guaranty. 18. As of the date hereof (i) the fair value of the property of Guarantor is greater than the total amount of liabilities including, without limitation, contingent liabilities, of Guarantor, (ii) the present fair saleable value of the assets of Guarantor (including, without limitation, intangible assets such as goodwill) is not less than the amount that will be required to pay the probable liability of Guarantor on its debts as they become absolute and matured, (iii) Guarantor is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) Guarantor does not intend to, nor does Guarantor believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (v) Guarantor is not engaged in a business or transaction, nor is Guarantor about to engage in a business or transaction for which its property would constitute unreasonably small capital after giving due consideration to the prevailing 6 practice in the industry in which Guarantor is engaged. For purposes of this Section 18, "contingent liabilities" shall be computed at the amount which, in - ---------- light of all relevant facts and circumstances, represents the amount that can reasonably be expected to become an actual or matured liability. 19. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Papers and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Wiser U.S.'s creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by any Noteholder as to that creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Wiser U.S. and any circumstances affecting Wiser U.S.'s ability to perform under the Loan Papers to which is a party or any collateral securing any Guaranteed Debt. 20. The Guaranteed Debt may not be reduced, discharged or released because or by reason of any existing or future offset, claim, or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Wiser U.S. or any other obligor against any Noteholder or against payment of the Guaranteed Debt, whether that offset, claim or defense arises in connection with the Guaranteed Debt or otherwise. Those claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability, accord and satisfaction, usury, forged signatures, mistake, impossibility, frustration of purpose, and unconscionability. 21. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar writing) and shall be given to such party at its address, telex or telecopy number set forth, in the case of any Noteholder, on the signature pages of the Credit Agreement, or, in the case of Guarantor, on the signature pages hereof, or such other address, telex or telecopy number as such party may hereafter specify for the purpose by notice to the other party. Each such notice, request or other communication shall be effective (a) if given by telex or telecopy, when such telex or telecopy is transmitted to the telex or telecopy number specified in this Section 21 and the appropriate answer back is received or receipt is ---------- otherwise confirmed, (ii) if given by mail, three (3) Domestic Business Days (as defined in the Credit Agreement) after deposit in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified in this Section 21. ---------- 22. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable, such provision shall be fully severable; this Guaranty shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Guaranty a provision as similar in terms to such illegal, invalid, or unenforceable provision as 7 may be possible and be legal, valid and enforceable. 23. (a) Except to the extent required for the exercise of the remedies provided in the other security instruments, Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of any Texas state or federal court over any action or proceeding arising out of or relating to this Guaranty or any other Loan Paper, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas state or federal court. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Litigation arising out of or in connection with this Guaranty or any of the Loan Papers brought in district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Guarantor hereby irrevocably waives any claim that any Litigation brought in any such court has been brought in an inconvenient forum. Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such Litigation by the mailing of copies thereof by certified mail, return receipt requested, postage prepaid, to Guarantor's office at the address set forth on the signature page hereof. Guarantor irrevocably agrees that any legal proceeding against Noteholders shall be brought in the district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Nothing herein shall affect the right of any Noteholder to commence legal proceedings or otherwise proceed against Guarantor in any jurisdiction or to serve process in any manner permitted by applicable law. As used herein, the term "Litigation" means any ---------- proceeding, claim, lawsuit or investigation (i) conducted or threatened by or before any court or governmental department, commission, board, bureau, agency or instrumentality of the United States or of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted or existing, or (ii) pending before any public or private arbitration board or panel. (b) Nothing in this Paragraph 23 shall affect any right of any ------------ Noteholder to serve legal process in any other manner permitted by law or affect the right of any Noteholder to bring any action or proceeding against Guarantor in the courts of any other jurisdictions. (c) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and the other Loan Papers. 24. THIS GUARANTY AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG NOTEHOLDERS, AGENT AND GUARANTOR AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF NOTEHOLDERS, AGENT AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG NOTEHOLDERS, AGENT AND GUARANTOR. 8 25. GUARANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT TO A JURY TRIAL, IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN PAPERS. 26. THIS GUARANTY AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. EXECUTED and effective as of the date first above written. GUARANTOR: WISER DELAWARE LLC By:/s/ Lawrence J. Finn ---------------------------------- Name: Lawrence J. Finn ------------------------------- Title: Vice President ------------------------------- Address: Wiser Delaware, LLC 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Chief Financial Officer Fax No. (214) 373-3610 9 EX-4.9 8 GUARANTY--WISER MARKETING COMPANY EXHIBIT 4.9 GUARANTY THIS GUARANTY (this "Guaranty") is dated as of the 20th day of May, 1997, -------- by THE WISER MARKETING COMPANY, a Delaware corporation ("Guarantor"), in favor --------- of NATIONSBANK OF TEXAS, N.A. and PNC BANK, NATIONAL ASSOCIATION (NationsBank of Texas, N.A. acting as a Bank but not as Agent, and PNC Bank, National Association, and each of their successors and assigns are collectively referred to herein as "Noteholders"). ----------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), The ---------- Wiser Oil Company of Canada, a Nova Scotia unlimited liability company, formerly known as The Wiser Oil Company Canada Ltd. ("Wiser Canada," and together with ------------ Wiser U.S., collectively referred to herein as "Borrowers"), Noteholders, and --------- NationsBank of Texas, N.A., as Agent ("Agent") are parties to that certain ----- Credit Agreement dated as of June 23, 1994 (as amended through the date hereof, the "Credit Agreement"), pursuant to which Noteholders have provided Wiser U.S. ---------------- with a revolving credit facility and Wiser Canada with a term credit facility (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrowers have requested that the Agent and Noteholders enter into a letter agreement of even date herewith (the "Second Amendment") pursuant to ---------------- which the Credit Agreement will be amended in certain respects; and WHEREAS, Banks have required as a condition to entering into the Second Amendment, that Guarantor execute and deliver this Guaranty; and WHEREAS, Guarantor has determined that valuable benefits, either directly or indirectly, will be derived by it as a result of the Second Amendment and the extension of credit to be made by Noteholders under the Credit Agreement as amended by the Second Amendment; and WHEREAS, Guarantor has further determined that the benefits accruing to it from the Credit Agreement as amended by the Second Amendment exceed Guarantor's anticipated liability under this Guaranty. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Guarantor hereby covenants and agrees as follows: 1. Guarantor hereby absolutely and unconditionally guarantees the prompt, complete and full payment when due, no matter how such shall become due, of the Guaranteed Debt (as hereinafter defined), and further guarantees that Wiser U.S. will properly and timely perform each and all of the Obligations. This Guaranty shall remain in effect until the Guaranteed Debt is fully 1 paid and performed. Guarantor may not rescind or revoke its obligations with respect to this Guaranty and the Guaranteed Debt. Notwithstanding any contrary provision in this Guaranty, however, the maximum liability of Guarantor under this Guaranty shall not exceed the Maximum Liability Amount (as hereinafter defined). As used herein, the term "Guaranteed Debt" means the Obligations, as --------------- defined in the Credit Agreement, and all present and future costs, attorneys' fees and expenses reasonably incurred by each of the Noteholders to enforce Wiser U.S.'s, any guarantor's (including Guarantor's), or any other obligor's payment of any of the Obligations, including, without limitation (to the extent lawful) all present and future accrued and unpaid interest (including, without limitation, all post-petition interest if Wiser U.S. or any Subsidiary voluntarily or involuntarily becomes subject to any Debtor Relief Law). As used herein, the term "Debtor Relief Law" means the Bankruptcy Code of the United ----------------- States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar laws affecting creditor's rights. As used herein, the term "Maximum Liability Amount" means $1.00 less than the amount of ------------------------ the lowest claim on this Guaranty which would render it void or voidable under any Debtor Relief Law as against Guarantor. 2. If Guarantor is or becomes liable for any indebtedness owing by Wiser U.S. to any Noteholder by endorsement or otherwise than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of each Noteholder hereunder shall be cumulative of any and all other rights that each Noteholder may ever have against Guarantor. The exercise by any Noteholder of any right or remedy hereunder or under any other instrument, at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 3. In the event of default by Wiser U.S. in payment of the Guaranteed Debt, or any part thereof, when such Guaranteed Debt becomes due, either by its terms or as the result of the exercise of any power to accelerate, Guarantor shall, on demand, and without further notice of dishonor and without any notice having been given to Guarantor previous to such demand of the acceptance by each Noteholder of this Guaranty, and without any notice having been given to such Guarantor previous to such demand of the creating or incurring of such Guaranteed Debt, pay the amount due thereon to each Noteholder at Agent's office as set forth in the Credit Agreement, and it shall not be necessary for any Noteholder, in order to enforce such payment by Guarantor, first, to institute suit or exhaust its remedies against Wiser U.S. or others liable on such Guaranteed Debt, to have Wiser U.S. joined with Guarantor in any suit brought under this Guaranty or to enforce its rights against any security which shall ever have been given to secure such indebtedness; provided, however, that in the event any Noteholder elects to enforce and/or exercise any remedies it may possess with respect to any security for the Guaranteed Debt prior to demanding payment from Guarantor, Guarantor shall nevertheless be obligated hereunder for any and all sums still owing to any of the Noteholders on the Guaranteed Debt and not repaid or recovered incident to the exercise of such remedies. 4. Notice to Guarantor of the acceptance of this Guaranty and of the making, renewing or assignment of the Guaranteed Debt and each item thereof, are hereby expressly 2 waived by Guarantor. 5. Each payment on the Guaranteed Debt shall be deemed to have been made by Wiser U.S. unless express written notice is given to each Noteholder at the time of such payment that such payment is made by Guarantor as specified in such notice. 6. If all or any part of the Guaranteed Debt at any time be secured, Guarantor agrees that Agent and/or any Noteholder may at any time and from time to time, at its discretion and with or without valuable consideration, allow substitution or withdrawal of collateral or other security and release collateral or other security or compromise or settle any amount due or owing under the Credit Agreement or amend or modify in whole or in part the Credit Agreement or any Loan Paper executed in connection with same without impairing or diminishing the obligations of Guarantor hereunder. Guarantor further agrees that if Wiser U.S. executes in favor of any Noteholder any collateral agreement, mortgage or other security instrument, the exercise by any Noteholder of any right or remedy thereby conferred on any such Noteholder shall be wholly discretionary with such Noteholder, and that the exercise or failure to exercise any such right or remedy shall in no way impair or diminish the obligations of Guarantor hereunder. Guarantor further agrees that none of the Noteholders nor Agent shall be liable for its failure to use diligence in the collection of the Guaranteed Debt or in preserving the liability of any Person liable for the Guaranteed Debt, and Guarantor hereby waives presentment for payment, notice of nonpayment, protest and notice thereof (including, notice of acceleration), and diligence in bringing suits against any Person liable on the Guaranteed Debt, or any part thereof. 7. Guarantor agrees that any Noteholder, in its discretion, may (i) bring suit against all guarantors (including, without limitation, Guarantor hereunder) of the Guaranteed Debt jointly and severally or against any one or more of them, (ii) compound or settle with any one or more of such guarantors for such consideration as Noteholders may deem proper, and (iii) release one or more of such guarantors from liability hereunder, and that no such action shall impair the rights of any such Noteholder to collect the Guaranteed Debt (or the unpaid balance thereof) from other such guarantors of the Guaranteed Debt, or any of them, not so sued, settled with or released. Guarantor agrees, however, that nothing contained in this paragraph, and no action by any Noteholder permitted under this paragraph, shall in any way affect or impair the rights or obligations of such guarantors among themselves. 8. Guarantor represents and warrants to each Noteholder that (i) Guarantor is a corporation, partnership or limited liability company (as applicable) duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation; (ii) Guarantor possesses all requisite authority and power to authorize, execute, deliver and comply with the terms of this Guaranty; (iii) this Guaranty has been duly authorized and approved by all necessary action on the part of Guarantor and constitutes a valid and binding obligation of Guarantor enforceable in accordance with its terms, except as (a) the enforcement thereof may be limited by applicable Debtor Relief Laws, and (b) the availability of equitable remedies may be limited by equitable principles of general applicability; (iv) no approval or consent of any court or Governmental Authority is required for the authorization, execution, delivery or compliance with 3 this Guaranty which has not been obtained (and copies thereof delivered to Agent and each Noteholder); and (v) Guarantor is not involved in, nor aware of the threat of, any Litigation (as defined in Paragraph 23(a) hereinbelow) which, in --------------- the event of an outcome unfavorable to Guarantor, could have a material adverse effect on the financial position, business, operations or prospects of Guarantor nor are there any outstanding or unpaid judgments against Guarantor. Guarantor further acknowledges that certain (A) representations and warranties in the Credit Agreement are applicable to it and confirms that each such representation and warranty is true and correct in all material respects, and (B) covenants and other provisions in the Credit Agreement are applicable to it or are imposed upon it and agrees to promptly comply with or be bound by each of them. 9. Guarantor covenants and agrees that until the Guaranteed Debt is paid and performed in full, except as otherwise provided in the Credit Agreement or unless each Noteholder gives its prior written consent to any deviation therefrom, it will (i) at all times maintain its existence and authority to transact business in any State or jurisdiction where Guarantor has assets and operations, (ii) promptly deliver to any Noteholder and to Agent such information respecting its business affairs, assets and liabilities as any Noteholder may reasonably request, and (iii) duly and punctually observe and perform all covenants applicable to Guarantor under the Credit Agreement and the other Loan Papers. 10. This Guaranty is for the benefit of each Noteholder, its successors and assigns, and in the event of an assignment by any Noteholder (or its successors or assigns) of the Guaranteed Debt, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Debt so assigned, may be transferred with such Guaranteed Debt. This Guaranty is binding upon Guarantor and its legal representatives, successors and assigns. 11. No modification, consent, amendment or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by each Noteholder, and then shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor to any other or further notice or demand in similar or other circumstances. No delay or omission by any Noteholder in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. All rights and remedies of each Noteholder hereunder are cumulative of each other and of every other right or remedy which any of the Noteholders may otherwise have at law or in equity or under any other contract or document, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 12. No provision herein or in any promissory note, instrument or any other Loan Paper executed by either Borrower or Guarantor evidencing the Guaranteed Debt shall require the payment or permit the collection of interest in excess of the Maximum Lawful Rate. If any excess of interest in such respect is provided for herein or in any such promissory note, 4 instrument, or any other Loan Paper, the provisions of this paragraph shall govern, and none of the Borrowers nor Guarantor shall be obligated to pay the amount of such interest to the extent that it is in excess of the amount permitted by law. The intention of the parties being to conform strictly to any applicable federal or state usury laws now in force, all promissory notes, instruments and other Loan Papers executed by Borrowers or Guarantor evidencing the Guaranteed Debt shall be held subject to reduction to the amount allowed under said usury laws as now or hereafter construed by the courts having jurisdiction. 13. If Guarantor should breach or fail to perform any provision of this Guaranty, Guarantor agrees to pay each Noteholder all costs and expenses (including court costs and reasonable attorneys fees) incurred by such Noteholder in the enforcement hereof. 14. (a) The liability of Guarantor under this Guaranty shall in no manner be impaired, affected or released by the insolvency, bankruptcy, making of an assignment for the benefit of creditors, arrangement, compensation, composition or readjustment of either Borrower, or any proceedings affecting the status, existence or assets of either Borrower or other similar proceedings instituted by or against either Borrower and affecting the assets of either Borrower. Furthermore, no obligations of Guarantor under this Guaranty may be released, diminished or affected by the occurrence of any one or more of the following events: (a) any taking or accepting of any other security or assurance for any Guaranteed Debt; (b) any release, surrender, exchange, subordination, impairment or loss of any collateral securing any Guaranteed Debt; (c) any full or partial release of the liability of any other guarantor or any other obligor on the Guaranteed Debt; (d) the modification of, or waiver of compliance with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy or lack of corporate, partnership or limited liability company (as applicable) power of Guarantor or any other obligor at any time liable for any of the Guaranteed Debt, whether now existing or occurring in the future; (f) any renewal, extension or rearrangement of any Guaranteed Debt or any adjustment, indulgence, forbearance, or compromise that may be granted or given by any Noteholder to any guarantor (including Guarantor) or any other obligor on the Guaranteed Debt; (g) any neglect, delay, omission, failure or refusal of any Noteholder to take or prosecute any action in connection with the Guaranteed Debt; (h) any failure of any Noteholder to notify Guarantor of any renewal, extension, or assignment of any Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by any Noteholder against Wiser U.S. or any new agreement between any Noteholder and Wiser U.S., it being understood that none of the Noteholders nor Agent are required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with any Guaranteed Debt, other than any notice required to be given to Guarantor by law or elsewhere in this Guaranty; (i) the unenforceability of any Guaranteed Debt against Guarantor or any other obligor because it exceeds the amount permitted by law, the act of creating it is ultra vires, the officers creating ----------- it exceeded their authority or violated their fiduciary duties in connection with it, or otherwise; or (j) any payment of the Guaranteed Debt to any Noteholder or Agent is held to constitute a preference under any Debtor Relief Law or for any other reason any Noteholder is required to refund that payment or make payment to someone else (and in each such instance this Guaranty will be reinstated in an amount equal to that payment). 5 (b) Guarantor acknowledges and agrees that any interest on any portion of the Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Obligations if said proceedings had not been commenced) shall be included in the Guaranteed Debt because it is the intention of Guarantor, Agent and Noteholders that the Guaranteed Debt which is guaranteed by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Wiser U.S. of any portion of such Guaranteed Debt. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Noteholders or Agent, or allow the claim of Noteholders or Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Debt is paid by Borrowers or any other obligor, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Agent or any Noteholder as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Debt for all purposes under this Guaranty. 15. Guarantor understands and agrees that any amounts of Guarantor on account with any Noteholder may be offset to satisfy the obligations of Guarantor hereunder. 16. Guarantor hereby subordinates and makes inferior any and all indebtedness now or at any time hereafter owed by Wiser U.S. to Guarantor to the Guaranteed Debt evidenced by the Credit Agreement and agrees after the occurrence of an Event of Default under the Credit Agreement, not to permit either Borrower to repay, or to accept payment from either Borrower of, such indebtedness or any part thereof without the prior written consent of each Noteholder. 17. Guarantor hereby waives any and all rights of subrogation to which Guarantor may otherwise be entitled against Wiser U.S., or any other guarantor of the Guaranteed Debt, as a result of any payment made by Guarantor pursuant to this Guaranty. 18. As of the date hereof (i) the fair value of the property of Guarantor is greater than the total amount of liabilities including, without limitation, contingent liabilities, of Guarantor, (ii) the present fair saleable value of the assets of Guarantor (including, without limitation, intangible assets such as goodwill) is not less than the amount that will be required to pay the probable liability of Guarantor on its debts as they become absolute and matured, (iii) Guarantor is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) Guarantor does not intend to, nor does Guarantor believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (v) Guarantor is not engaged in a business or transaction, nor is Guarantor about to engage in a business or transaction for which its property would constitute unreasonably small capital after giving due consideration to the prevailing 6 practice in the industry in which Guarantor is engaged. For purposes of this Section 18, "contingent liabilities" shall be computed at the amount which, in - ---------- light of all relevant facts and circumstances, represents the amount that can reasonably be expected to become an actual or matured liability. 19. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Papers and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Wiser U.S.'s creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by any Noteholder as to that creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Wiser U.S. and any circumstances affecting Wiser U.S.'s ability to perform under the Loan Papers to which is a party or any collateral securing any Guaranteed Debt. 20. The Guaranteed Debt may not be reduced, discharged or released because or by reason of any existing or future offset, claim, or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Wiser U.S. or any other obligor against any Noteholder or against payment of the Guaranteed Debt, whether that offset, claim or defense arises in connection with the Guaranteed Debt or otherwise. Those claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability, accord and satisfaction, usury, forged signatures, mistake, impossibility, frustration of purpose, and unconscionability. 21. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar writing) and shall be given to such party at its address, telex or telecopy number set forth, in the case of any Noteholder, on the signature pages of the Credit Agreement, or, in the case of Guarantor, on the signature pages hereof, or such other address, telex or telecopy number as such party may hereafter specify for the purpose by notice to the other party. Each such notice, request or other communication shall be effective (a) if given by telex or telecopy, when such telex or telecopy is transmitted to the telex or telecopy number specified in this Section 21 and the appropriate answer back is received or receipt is ---------- otherwise confirmed, (ii) if given by mail, three (3) Domestic Business Days (as defined in the Credit Agreement) after deposit in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified in this Section 21. ---------- 22. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable, such provision shall be fully severable; this Guaranty shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Guaranty a provision as similar in terms to such illegal, invalid, or unenforceable provision as 7 may be possible and be legal, valid and enforceable. 23. (a) Except to the extent required for the exercise of the remedies provided in the other security instruments, Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of any Texas state or federal court over any action or proceeding arising out of or relating to this Guaranty or any other Loan Paper, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas state or federal court. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Litigation arising out of or in connection with this Guaranty or any of the Loan Papers brought in district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Guarantor hereby irrevocably waives any claim that any Litigation brought in any such court has been brought in an inconvenient forum. Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such Litigation by the mailing of copies thereof by certified mail, return receipt requested, postage prepaid, to Guarantor's office at the address set forth on the signature page hereof. Guarantor irrevocably agrees that any legal proceeding against Noteholders shall be brought in the district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Nothing herein shall affect the right of any Noteholder to commence legal proceedings or otherwise proceed against Guarantor in any jurisdiction or to serve process in any manner permitted by applicable law. As used herein, the term "Litigation" means any ---------- proceeding, claim, lawsuit or investigation (i) conducted or threatened by or before any court or governmental department, commission, board, bureau, agency or instrumentality of the United States or of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted or existing, or (ii) pending before any public or private arbitration board or panel. (b) Nothing in this Paragraph 23 shall affect any right of any ------------ Noteholder to serve legal process in any other manner permitted by law or affect the right of any Noteholder to bring any action or proceeding against Guarantor in the courts of any other jurisdictions. (c) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and the other Loan Papers. 24. THIS GUARANTY AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG NOTEHOLDERS, AGENT AND GUARANTOR AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF NOTEHOLDERS, AGENT AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG NOTEHOLDERS, AGENT AND GUARANTOR. 8 25. GUARANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT TO A JURY TRIAL, IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN PAPERS. 26. THIS GUARANTY AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. EXECUTED and effective as of the date first above written. GUARANTOR: THE WISER MARKETING COMPANY By:/s/ Lawrence J. Finn ----------------------------------- Name: Lawrence J. Finn --------------------------------- Title: Vice President -------------------------------- Address: The Wiser Marketing Company 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Chief Financial Officer Fax No. (214) 373-3610 9 EX-4.10 9 GUARANTY--WISER OIL COMPANY OF CANADA EXHIBIT 4.10 GUARANTY THIS GUARANTY (this "Guaranty") is dated as of the 20th day of May, 1997, -------- by THE WISER OIL COMPANY OF CANADA, a Nova Scotia unlimited liability company ("Guarantor"), in favor of NATIONSBANK OF TEXAS, N.A. and PNC BANK, NATIONAL --------- ASSOCIATION (NationsBank of Texas, N.A. acting as a Bank but not as Agent, and PNC Bank, National Association, and each of their successors and assigns are collectively referred to herein as "Noteholders"). ----------- W I T N E S S E T H: - - - - - - - - - - WHEREAS, The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), ---------- Guarantor, Noteholders, and NationsBank of Texas, N.A., as Agent ("Agent") are ----- parties to that certain Credit Agreement dated as of June 23, 1994 (as amended through the date hereof, the "Credit Agreement"), pursuant to which Noteholders ---------------- have provided Wiser U.S. with a revolving credit facility and Guarantor with a term credit facility (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrowers have requested that the Agent and Noteholders enter into a letter agreement of even date herewith (the "Second Amendment") pursuant to ---------------- which the Credit Agreement will be amended in certain respects; and WHEREAS, Banks have required as a condition to entering into the Second Amendment, that Guarantor execute and deliver this Guaranty; and WHEREAS, Guarantor has determined that valuable benefits, either directly or indirectly, will be derived by it as a result of the Second Amendment and the extension of credit to be made by Noteholders under the Credit Agreement as amended by the Second Amendment thereunder; and WHEREAS, Guarantor has further determined that the benefits accruing to it from the Credit Agreement as amended by the Second Amendment, exceed Guarantor's anticipated liability under this Guaranty. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Guarantor hereby covenants and agrees as follows: 1. Guarantor hereby absolutely and unconditionally guarantees the prompt, complete and full payment when due, no matter how such shall become due, of the Guaranteed Debt (as hereinafter defined), and further guarantees that Wiser U.S. will properly and timely perform each and all of the Obligations. This Guaranty shall remain in effect until the Guaranteed Debt is fully paid and performed. Guarantor may not rescind or revoke its obligations with respect to this 1 Guaranty and the Guaranteed Debt. Notwithstanding any contrary provision in this Guaranty, however, the maximum liability of Guarantor under this Guaranty shall not exceed the Maximum Liability Amount (as hereinafter defined). As used herein, the term "Guaranteed Debt" means the Obligations, as defined in the --------------- Credit Agreement, and all present and future costs, attorneys' fees and expenses reasonably incurred by each of the Noteholders to enforce Wiser U.S.'s, any guarantor's (including Guarantor's), or any other obligor's payment of any of the Obligations, including, without limitation (to the extent lawful) all present and future accrued and unpaid interest (including, without limitation, all post-petition interest if Wiser U.S. or any Subsidiary voluntarily or involuntarily becomes subject to any Debtor Relief Law). As used herein, the term "Debtor Relief Law" means the Bankruptcy Code of the United States of ----------------- America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar laws affecting creditor's rights. As used herein, the term "Maximum Liability Amount" means $1.00 less than the amount of the lowest ------------------------ claim on this Guaranty which would render it void or voidable under any Debtor Relief Law as against Guarantor. 2. If Guarantor is or becomes liable for any indebtedness owing by Wiser U.S. to any Noteholder by endorsement or otherwise than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of each Noteholder hereunder shall be cumulative of any and all other rights that each Noteholder may ever have against Guarantor. The exercise by any Noteholder of any right or remedy hereunder or under any other instrument, at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 3. In the event of default by Wiser U.S. in payment of the Guaranteed Debt, or any part thereof, when such Guaranteed Debt becomes due, either by its terms or as the result of the exercise of any power to accelerate, Guarantor shall, on demand, and without further notice of dishonor and without any notice having been given to Guarantor previous to such demand of the acceptance by each Noteholder of this Guaranty, and without any notice having been given to such Guarantor previous to such demand of the creating or incurring of such Guaranteed Debt, pay the amount due thereon to each Noteholder at Agent's office as set forth in the Credit Agreement, and it shall not be necessary for any Noteholder, in order to enforce such payment by Guarantor, first, to institute suit or exhaust its remedies against Wiser U.S. or others liable on such Guaranteed Debt, to have Wiser U.S. joined with Guarantor in any suit brought under this Guaranty or to enforce its rights against any security which shall ever have been given to secure such indebtedness; provided, however, that in the event any Noteholder elects to enforce and/or exercise any remedies it may possess with respect to any security for the Guaranteed Debt prior to demanding payment from Guarantor, Guarantor shall nevertheless be obligated hereunder for any and all sums still owing to any of the Noteholders on the Guaranteed Debt and not repaid or recovered incident to the exercise of such remedies. 4. Notice to Guarantor of the acceptance of this Guaranty and of the making, renewing or assignment of the Guaranteed Debt and each item thereof, are hereby expressly waived by Guarantor. 2 5. Each payment on the Guaranteed Debt shall be deemed to have been made by Wiser U.S. unless express written notice is given to each Noteholder at the time of such payment that such payment is made by Guarantor as specified in such notice. 6. If all or any part of the Guaranteed Debt at any time be secured, Guarantor agrees that Agent and/or any Noteholder may at any time and from time to time, at its discretion and with or without valuable consideration, allow substitution or withdrawal of collateral or other security and release collateral or other security or compromise or settle any amount due or owing under the Credit Agreement or amend or modify in whole or in part the Credit Agreement or any Loan Paper executed in connection with same without impairing or diminishing the obligations of Guarantor hereunder. Guarantor further agrees that if Wiser U.S. executes in favor of any Noteholder any collateral agreement, mortgage or other security instrument, the exercise by any Noteholder of any right or remedy thereby conferred on any such Noteholder shall be wholly discretionary with such Noteholder, and that the exercise or failure to exercise any such right or remedy shall in no way impair or diminish the obligations of Guarantor hereunder. Guarantor further agrees that none of the Noteholders nor Agent shall be liable for its failure to use diligence in the collection of the Guaranteed Debt or in preserving the liability of any Person liable for the Guaranteed Debt, and Guarantor hereby waives presentment for payment, notice of nonpayment, protest and notice thereof (including, notice of acceleration), and diligence in bringing suits against any Person liable on the Guaranteed Debt, or any part thereof. 7. Guarantor agrees that any Noteholder, in its discretion, may (i) bring suit against all guarantors (including, without limitation, Guarantor hereunder) of the Guaranteed Debt jointly and severally or against any one or more of them, (ii) compound or settle with any one or more of such guarantors for such consideration as Noteholders may deem proper, and (iii) release one or more of such guarantors from liability hereunder, and that no such action shall impair the rights of any such Noteholder to collect the Guaranteed Debt (or the unpaid balance thereof) from other such guarantors of the Guaranteed Debt, or any of them, not so sued, settled with or released. Guarantor agrees, however, that nothing contained in this paragraph, and no action by any Noteholder permitted under this paragraph, shall in any way affect or impair the rights or obligations of such guarantors among themselves. 8. Guarantor represents and warrants to each Noteholder that (i) Guarantor is a corporation, partnership or limited liability company (as applicable) duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation; (ii) Guarantor possesses all requisite authority and power to authorize, execute, deliver and comply with the terms of this Guaranty; (iii) this Guaranty has been duly authorized and approved by all necessary action on the part of Guarantor and constitutes a valid and binding obligation of Guarantor enforceable in accordance with its terms, except as (a) the enforcement thereof may be limited by applicable Debtor Relief Laws, and (b) the availability of equitable remedies may be limited by equitable principles of general applicability; (iv) no approval or consent of any court or Governmental Authority is required for the authorization, execution, delivery or compliance with this Guaranty which has not been obtained (and copies thereof delivered to Agent and each Noteholder); and (v) Guarantor is not involved in, nor aware of the threat of, any Litigation (as 3 defined in Paragraph 23(a) hereinbelow) which, in the event of an outcome --------------- unfavorable to Guarantor, could have a material adverse effect on the financial position, business, operations or prospects of Guarantor nor are there any outstanding or unpaid judgments against Guarantor. Guarantor further acknowledges that certain (A) representations and warranties in the Credit Agreement are applicable to it and confirms that each such representation and warranty is true and correct in all material respects, and (B) covenants and other provisions in the Credit Agreement are applicable to it or are imposed upon it and agrees to promptly comply with or be bound by each of them. 9. Guarantor covenants and agrees that until the Guaranteed Debt is paid and performed in full, except as otherwise provided in the Credit Agreement or unless each Noteholder gives its prior written consent to any deviation therefrom, it will (i) at all times maintain its existence and authority to transact business in any State or jurisdiction where Guarantor has assets and operations, (ii) promptly deliver to any Noteholder and to Agent such information respecting its business affairs, assets and liabilities as any Noteholder may reasonably request, and (iii) duly and punctually observe and perform all covenants applicable to Guarantor under the Credit Agreement and the other Loan Papers. 10. This Guaranty is for the benefit of each Noteholder, its successors and assigns, and in the event of an assignment by any Noteholder (or its successors or assigns) of the Guaranteed Debt, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Debt so assigned, may be transferred with such Guaranteed Debt. This Guaranty is binding upon Guarantor and its legal representatives, successors and assigns. 11. No modification, consent, amendment or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by each Noteholder, and then shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor to any other or further notice or demand in similar or other circumstances. No delay or omission by any Noteholder in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. All rights and remedies of each Noteholder hereunder are cumulative of each other and of every other right or remedy which any of the Noteholders may otherwise have at law or in equity or under any other contract or document, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 12. No provision herein or in any promissory note, instrument or any other Loan Paper executed by Wiser U.S. or Guarantor evidencing the Guaranteed Debt shall require the payment or permit the collection of interest in excess of the Maximum Lawful Rate. If any excess of interest in such respect is provided for herein or in any such promissory note, instrument, or any other Loan Paper, the provisions of this paragraph shall govern, and neither Wiser U.S. nor Guarantor shall be obligated to pay the amount of such interest to the extent that it is in excess 4 of the amount permitted by law. The intention of the parties being to conform strictly to any applicable federal or state usury laws now in force, all promissory notes, instruments and other Loan Papers executed by Wiser U.S. or Guarantor evidencing the Guaranteed Debt shall be held subject to reduction to the amount allowed under said usury laws as now or hereafter construed by the courts having jurisdiction. 13. If Guarantor should breach or fail to perform any provision of this Guaranty, Guarantor agrees to pay each Noteholder all costs and expenses (including court costs and reasonable attorneys fees) incurred by such Noteholder in the enforcement hereof. 14. (a) The liability of Guarantor under this Guaranty shall in no manner be impaired, affected or released by the insolvency, bankruptcy, making of an assignment for the benefit of creditors, arrangement, compensation, composition or readjustment of Wiser U.S., or any proceedings affecting the status, existence or assets of Wiser U.S. or other similar proceedings instituted by or against Wiser U.S. and affecting the assets of Wiser U.S. Furthermore, no obligations of Guarantor under this Guaranty may be released, diminished or affected by the occurrence of any one or more of the following events: (a) any taking or accepting of any other security or assurance for any Guaranteed Debt; (b) any release, surrender, exchange, subordination, impairment or loss of any collateral securing any Guaranteed Debt; (c) any full or partial release of the liability of any other guarantor or any other obligor on the Guaranteed Debt; (d) the modification of, or waiver of compliance with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy or lack of corporate, partnership or limited liability company (as applicable) power of Guarantor or any other obligor at any time liable for any of the Guaranteed Debt, whether now existing or occurring in the future; (f) any renewal, extension or rearrangement of any Guaranteed Debt or any adjustment, indulgence, forbearance, or compromise that may be granted or given by any Noteholder to any guarantor (including Guarantor) or any other obligor on the Guaranteed Debt; (g) any neglect, delay, omission, failure or refusal of any Noteholder to take or prosecute any action in connection with the Guaranteed Debt; (h) any failure of any Noteholder to notify Guarantor of any renewal, extension, or assignment of any Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by any Noteholder against Wiser U.S. or any new agreement between any Noteholder and Wiser U.S., it being understood that none of the Noteholders nor Agent are required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with any Guaranteed Debt, other than any notice required to be given to Guarantor by law or elsewhere in this Guaranty; (i) the unenforceability of any Guaranteed Debt against Guarantor or any other obligor because it exceeds the amount permitted by law, the act of creating it is ultra vires, the officers creating it exceeded ----------- their authority or violated their fiduciary duties in connection with it, or otherwise; or (j) any payment of the Guaranteed Debt to any Noteholder or Agent is held to constitute a preference under any Debtor Relief Law or for any other reason any Noteholder is required to refund that payment or make payment to someone else (and in each such instance this Guaranty will be reinstated in an amount equal to that payment). (b) Guarantor acknowledges and agrees that any interest on any portion of the 5 Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Obligations if said proceedings had not been commenced) shall be included in the Guaranteed Debt because it is the intention of Guarantor, Agent and Noteholders that the Guaranteed Debt which is guaranteed by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Wiser U.S. of any portion of such Guaranteed Debt. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Noteholders or Agent, or allow the claim of Noteholders or Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Debt is paid by Wiser U.S. or any other obligor, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Agent or any Noteholder as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Debt for all purposes under this Guaranty. 15. Guarantor understands and agrees that any amounts of Guarantor on account with any Noteholder may be offset to satisfy the obligations of Guarantor hereunder. 16. Guarantor hereby subordinates and makes inferior any and all indebtedness now or at any time hereafter owed by Wiser U.S. to Guarantor to the Guaranteed Debt evidenced by the Credit Agreement and agrees after the occurrence of an Event of Default under the Credit Agreement, not to permit Wiser U.S. to repay, or to accept payment from Wiser U.S. of, such indebtedness or any part thereof without the prior written consent of each Noteholder. 17. Guarantor hereby waives any and all rights of subrogation to which Guarantor may otherwise be entitled against Wiser U.S., or any other guarantor of the Guaranteed Debt, as a result of any payment made by Guarantor pursuant to this Guaranty. 18. As of the date hereof (i) the fair value of the property of Guarantor is greater than the total amount of liabilities including, without limitation, contingent liabilities, of Guarantor, (ii) the present fair saleable value of the assets of Guarantor (including, without limitation, intangible assets such as goodwill) is not less than the amount that will be required to pay the probable liability of Guarantor on its debts as they become absolute and matured, (iii) Guarantor is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) Guarantor does not intend to, nor does Guarantor believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (v) Guarantor is not engaged in a business or transaction, nor is Guarantor about to engage in a business or transaction for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which Guarantor is engaged. For purposes of this Section 18, ---------- 6 "contingent liabilities" shall be computed at the amount which, in light of all relevant facts and circumstances, represents the amount that can reasonably be expected to become an actual or matured liability. 19. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Papers and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Wiser U.S.'s creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by any Noteholder as to that creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Wiser U.S. and any circumstances affecting Wiser U.S.'s ability to perform under the Loan Papers to which is a party or any collateral securing any Guaranteed Debt. 20. The Guaranteed Debt may not be reduced, discharged or released because or by reason of any existing or future offset, claim, or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Wiser U.S. or any other obligor against any Noteholder or against payment of the Guaranteed Debt, whether that offset, claim or defense arises in connection with the Guaranteed Debt or otherwise. Those claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability, accord and satisfaction, usury, forged signatures, mistake, impossibility, frustration of purpose, and unconscionability. 21. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar writing) and shall be given to such party at its address, telex or telecopy number set forth, in the case of any Noteholder, on the signature pages of the Credit Agreement, or, in the case of Guarantor, on the signature pages hereof, or such other address, telex or telecopy number as such party may hereafter specify for the purpose by notice to the other party. Each such notice, request or other communication shall be effective (a) if given by telex or telecopy, when such telex or telecopy is transmitted to the telex or telecopy number specified in this Section 21 and the appropriate answer back is received or receipt is ---------- otherwise confirmed, (ii) if given by mail, three (3) Domestic Business Days (as defined in the Credit Agreement) after deposit in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified in this Section 21. ---------- 22. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable, such provision shall be fully severable; this Guaranty shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Guaranty a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid and enforceable. 7 23. (a) Except to the extent required for the exercise of the remedies provided in the other security instruments, Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of any Texas state or federal court over any action or proceeding arising out of or relating to this Guaranty or any other Loan Paper, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas state or federal court. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Litigation arising out of or in connection with this Guaranty or any of the Loan Papers brought in district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Guarantor hereby irrevocably waives any claim that any Litigation brought in any such court has been brought in an inconvenient forum. Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such Litigation by the mailing of copies thereof by certified mail, return receipt requested, postage prepaid, to Guarantor's office at the address set forth on the signature page hereof. Guarantor irrevocably agrees that any legal proceeding against Noteholders shall be brought in the district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Nothing herein shall affect the right of any Noteholder to commence legal proceedings or otherwise proceed against Guarantor in any jurisdiction or to serve process in any manner permitted by applicable law. As used herein, the term "Litigation" means any ---------- proceeding, claim, lawsuit or investigation (i) conducted or threatened by or before any court or governmental department, commission, board, bureau, agency or instrumentality of the United States or of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted or existing, or (ii) pending before any public or private arbitration board or panel. (b) Nothing in this Paragraph 23 shall affect any right of any ------------ Noteholder to serve legal process in any other manner permitted by law or affect the right of any Noteholder to bring any action or proceeding against Guarantor in the courts of any other jurisdictions. (c) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and the other Loan Papers. 24. THIS GUARANTY AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG NOTEHOLDERS, AGENT AND GUARANTOR AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF NOTEHOLDERS, AGENT AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG NOTEHOLDERS, AGENT AND GUARANTOR. 25. GUARANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT 8 TO A JURY TRIAL, IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN PAPERS. 26. THIS GUARANTY AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. EXECUTED and effective as of the date first above written. GUARANTOR: THE WISER OIL COMPANY OF CANADA By: /s/ Lawrence J. Finn ---------------------------- Name: Lawrence J. Finn -------------------------- Title: Vice President ------------------------- Address: The Wiser Oil Company of Canada 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Chief Financial Officer Fax No. (214) 373-3610 9 EX-4.11 10 GUARANTY--T.W.O.C., INC. EXHIBIT 4.11 GUARANTY THIS GUARANTY (this "Guaranty") is dated as of the 20th day of May, 1997, -------- by T.W.O.C., INC., a Delaware corporation ("Guarantor"), in favor of NATIONSBANK --------- OF TEXAS, N.A. and PNC BANK, NATIONAL ASSOCIATION (NationsBank of Texas, N.A. acting as a Bank but not as Agent, and PNC Bank, National Association, and each of their successors and assigns are collectively referred to herein as "Noteholders"). - ------------ W I T N E S S E T H: - - - - - - - - - - WHEREAS, The Wiser Oil Company, a Delaware corporation ("Wiser U.S."), The ---------- Wiser Oil Company of Canada, a Nova Scotia unlimited liability company, formerly known as The Wiser Oil Company Canada Ltd. ("Wiser Canada," and together with ------------ Wiser U.S., collectively referred to herein as "Borrowers"), Noteholders, and --------- NationsBank of Texas, N.A., as Agent ("Agent") are parties to that certain ----- Credit Agreement dated as of June 23, 1994 (as amended through the date hereof, the "Credit Agreement"), pursuant to which Noteholders have provided Wiser U.S. ---------------- with a revolving credit facility and Wiser Canada with a term credit facility (unless otherwise defined herein, all terms used herein with their initial letter capitalized shall have the meaning given such terms in the Credit Agreement); and WHEREAS, Borrowers have requested that the Agent and Noteholders enter into a letter agreement of even date herewith (the "Second Amendment") pursuant to ---------------- which the Credit Agreement will be amended in certain respects; and WHEREAS, Banks have required as a condition to entering into the Second Amendment, that Guarantor execute and deliver this Guaranty; and WHEREAS, Guarantor has determined that valuable benefits, either directly or indirectly, will be derived by it as a result of the Second Amendment and the extension of credit to be made by Noteholders under the Credit Agreement as amended by the Second Amendment; and WHEREAS, Guarantor has further determined that the benefits accruing to it from the Credit Agreement as amended by the Second Amendment exceed Guarantor's anticipated liability under this Guaranty. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged and confessed, Guarantor hereby covenants and agrees as follows: 1. Guarantor hereby absolutely and unconditionally guarantees the prompt, complete and full payment when due, no matter how such shall become due, of the Guaranteed Debt (as hereinafter defined), and further guarantees that Wiser U.S. will properly and timely perform each and all of the Obligations. This Guaranty shall remain in effect until the Guaranteed Debt is fully paid and performed. Guarantor may not rescind or revoke its obligations with respect to this 1 Guaranty and the Guaranteed Debt. Notwithstanding any contrary provision in this Guaranty, however, the maximum liability of Guarantor under this Guaranty shall not exceed the Maximum Liability Amount (as hereinafter defined). As used herein, the term "Guaranteed Debt" means the Obligations, as defined in the --------------- Credit Agreement, and all present and future costs, attorneys' fees and expenses reasonably incurred by each of the Noteholders to enforce Wiser U.S.'s, any guarantor's (including Guarantor's), or any other obligor's payment of any of the Obligations, including, without limitation (to the extent lawful) all present and future accrued and unpaid interest (including, without limitation, all post-petition interest if Wiser U.S. or any Subsidiary voluntarily or involuntarily becomes subject to any Debtor Relief Law). As used herein, the term "Debtor Relief Law" means the Bankruptcy Code of the United States of ----------------- America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar laws affecting creditor's rights. As used herein, the term "Maximum Liability Amount" means $1.00 less than the amount of the lowest ------------------------ claim on this Guaranty which would render it void or voidable under any Debtor Relief Law as against Guarantor. 2. If Guarantor is or becomes liable for any indebtedness owing by Wiser U.S. to any Noteholder by endorsement or otherwise than under this Guaranty, such liability shall not be in any manner impaired or affected hereby, and the rights of each Noteholder hereunder shall be cumulative of any and all other rights that each Noteholder may ever have against Guarantor. The exercise by any Noteholder of any right or remedy hereunder or under any other instrument, at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 3. In the event of default by Wiser U.S. in payment of the Guaranteed Debt, or any part thereof, when such Guaranteed Debt becomes due, either by its terms or as the result of the exercise of any power to accelerate, Guarantor shall, on demand, and without further notice of dishonor and without any notice having been given to Guarantor previous to such demand of the acceptance by each Noteholder of this Guaranty, and without any notice having been given to such Guarantor previous to such demand of the creating or incurring of such Guaranteed Debt, pay the amount due thereon to each Noteholder at Agent's office as set forth in the Credit Agreement, and it shall not be necessary for any Noteholder, in order to enforce such payment by Guarantor, first, to institute suit or exhaust its remedies against Wiser U.S. or others liable on such Guaranteed Debt, to have Wiser U.S. joined with Guarantor in any suit brought under this Guaranty or to enforce its rights against any security which shall ever have been given to secure such indebtedness; provided, however, that in the event any Noteholder elects to enforce and/or exercise any remedies it may possess with respect to any security for the Guaranteed Debt prior to demanding payment from Guarantor, Guarantor shall nevertheless be obligated hereunder for any and all sums still owing to any of the Noteholders on the Guaranteed Debt and not repaid or recovered incident to the exercise of such remedies. 4. Notice to Guarantor of the acceptance of this Guaranty and of the making, renewing or assignment of the Guaranteed Debt and each item thereof, are hereby expressly waived by Guarantor. 2 5. Each payment on the Guaranteed Debt shall be deemed to have been made by Wiser U.S. unless express written notice is given to each Noteholder at the time of such payment that such payment is made by Guarantor as specified in such notice. 6. If all or any part of the Guaranteed Debt at any time be secured, Guarantor agrees that Agent and/or any Noteholder may at any time and from time to time, at its discretion and with or without valuable consideration, allow substitution or withdrawal of collateral or other security and release collateral or other security or compromise or settle any amount due or owing under the Credit Agreement or amend or modify in whole or in part the Credit Agreement or any Loan Paper executed in connection with same without impairing or diminishing the obligations of Guarantor hereunder. Guarantor further agrees that if Wiser U.S. executes in favor of any Noteholder any collateral agreement, mortgage or other security instrument, the exercise by any Noteholder of any right or remedy thereby conferred on any such Noteholder shall be wholly discretionary with such Noteholder, and that the exercise or failure to exercise any such right or remedy shall in no way impair or diminish the obligations of Guarantor hereunder. Guarantor further agrees that none of the Noteholders nor Agent shall be liable for its failure to use diligence in the collection of the Guaranteed Debt or in preserving the liability of any Person liable for the Guaranteed Debt, and Guarantor hereby waives presentment for payment, notice of nonpayment, protest and notice thereof (including, notice of acceleration), and diligence in bringing suits against any Person liable on the Guaranteed Debt, or any part thereof. 7. Guarantor agrees that any Noteholder, in its discretion, may (i) bring suit against all guarantors (including, without limitation, Guarantor hereunder) of the Guaranteed Debt jointly and severally or against any one or more of them, (ii) compound or settle with any one or more of such guarantors for such consideration as Noteholders may deem proper, and (iii) release one or more of such guarantors from liability hereunder, and that no such action shall impair the rights of any such Noteholder to collect the Guaranteed Debt (or the unpaid balance thereof) from other such guarantors of the Guaranteed Debt, or any of them, not so sued, settled with or released. Guarantor agrees, however, that nothing contained in this paragraph, and no action by any Noteholder permitted under this paragraph, shall in any way affect or impair the rights or obligations of such guarantors among themselves. 8. Guarantor represents and warrants to each Noteholder that (i) Guarantor is a corporation, partnership or limited liability company (as applicable) duly organized and validly existing under the laws of the jurisdiction of its incorporation or formation; (ii) Guarantor possesses all requisite authority and power to authorize, execute, deliver and comply with the terms of this Guaranty; (iii) this Guaranty has been duly authorized and approved by all necessary action on the part of Guarantor and constitutes a valid and binding obligation of Guarantor enforceable in accordance with its terms, except as (a) the enforcement thereof may be limited by applicable Debtor Relief Laws, and (b) the availability of equitable remedies may be limited by equitable principles of general applicability; (iv) no approval or consent of any court or Governmental Authority is required for the authorization, execution, delivery or compliance with this Guaranty which has not been obtained (and copies thereof delivered to Agent and each Noteholder); and (v) Guarantor is not involved in, nor aware of the threat of, any Litigation (as 3 defined in Paragraph 23(a) hereinbelow) which, in the event of an outcome --------------- unfavorable to Guarantor, could have a material adverse effect on the financial position, business, operations or prospects of Guarantor nor are there any outstanding or unpaid judgments against Guarantor. Guarantor further acknowledges that certain (A) representations and warranties in the Credit Agreement are applicable to it and confirms that each such representation and warranty is true and correct in all material respects, and (B) covenants and other provisions in the Credit Agreement are applicable to it or are imposed upon it and agrees to promptly comply with or be bound by each of them. 9. Guarantor covenants and agrees that until the Guaranteed Debt is paid and performed in full, except as otherwise provided in the Credit Agreement or unless each Noteholder gives its prior written consent to any deviation therefrom, it will (i) at all times maintain its existence and authority to transact business in any State or jurisdiction where Guarantor has assets and operations, (ii) promptly deliver to any Noteholder and to Agent such information respecting its business affairs, assets and liabilities as any Noteholder may reasonably request, and (iii) duly and punctually observe and perform all covenants applicable to Guarantor under the Credit Agreement and the other Loan Papers. 10. This Guaranty is for the benefit of each Noteholder, its successors and assigns, and in the event of an assignment by any Noteholder (or its successors or assigns) of the Guaranteed Debt, or any part thereof, the rights and benefits hereunder, to the extent applicable to the Guaranteed Debt so assigned, may be transferred with such Guaranteed Debt. This Guaranty is binding upon Guarantor and its legal representatives, successors and assigns. 11. No modification, consent, amendment or waiver of any provision of this Guaranty, nor consent to any departure by Guarantor therefrom, shall be effective unless the same shall be in writing and signed by each Noteholder, and then shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on Guarantor in any case shall, of itself, entitle Guarantor to any other or further notice or demand in similar or other circumstances. No delay or omission by any Noteholder in exercising any power or right hereunder shall impair any such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such power preclude other or further exercise thereof, or the exercise of any other right or power hereunder. All rights and remedies of each Noteholder hereunder are cumulative of each other and of every other right or remedy which any of the Noteholders may otherwise have at law or in equity or under any other contract or document, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 12. No provision herein or in any promissory note, instrument or any other Loan Paper executed by either Borrower or Guarantor evidencing the Guaranteed Debt shall require the payment or permit the collection of interest in excess of the Maximum Lawful Rate. If any excess of interest in such respect is provided for herein or in any such promissory note, instrument, or any other Loan Paper, the provisions of this paragraph shall govern, and none of the Borrowers nor Guarantor shall be obligated to pay the amount of such interest to the extent 4 that it is in excess of the amount permitted by law. The intention of the parties being to conform strictly to any applicable federal or state usury laws now in force, all promissory notes, instruments and other Loan Papers executed by Borrowers or Guarantor evidencing the Guaranteed Debt shall be held subject to reduction to the amount allowed under said usury laws as now or hereafter construed by the courts having jurisdiction. 13. If Guarantor should breach or fail to perform any provision of this Guaranty, Guarantor agrees to pay each Noteholder all costs and expenses (including court costs and reasonable attorneys fees) incurred by such Noteholder in the enforcement hereof. 14. (a) The liability of Guarantor under this Guaranty shall in no manner be impaired, affected or released by the insolvency, bankruptcy, making of an assignment for the benefit of creditors, arrangement, compensation, composition or readjustment of either Borrower, or any proceedings affecting the status, existence or assets of either Borrower or other similar proceedings instituted by or against either Borrower and affecting the assets of either Borrower. Furthermore, no obligations of Guarantor under this Guaranty may be released, diminished or affected by the occurrence of any one or more of the following events: (a) any taking or accepting of any other security or assurance for any Guaranteed Debt; (b) any release, surrender, exchange, subordination, impairment or loss of any collateral securing any Guaranteed Debt; (c) any full or partial release of the liability of any other guarantor or any other obligor on the Guaranteed Debt; (d) the modification of, or waiver of compliance with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy or lack of corporate, partnership or limited liability company (as applicable) power of Guarantor or any other obligor at any time liable for any of the Guaranteed Debt, whether now existing or occurring in the future; (f) any renewal, extension or rearrangement of any Guaranteed Debt or any adjustment, indulgence, forbearance, or compromise that may be granted or given by any Noteholder to any guarantor (including Guarantor) or any other obligor on the Guaranteed Debt; (g) any neglect, delay, omission, failure or refusal of any Noteholder to take or prosecute any action in connection with the Guaranteed Debt; (h) any failure of any Noteholder to notify Guarantor of any renewal, extension, or assignment of any Guaranteed Debt, or the release of any security or of any other action taken or refrained from being taken by any Noteholder against Wiser U.S. or any new agreement between any Noteholder and Wiser U.S., it being understood that none of the Noteholders nor Agent are required to give Guarantor any notice of any kind under any circumstances whatsoever with respect to or in connection with any Guaranteed Debt, other than any notice required to be given to Guarantor by law or elsewhere in this Guaranty; (i) the unenforceability of any Guaranteed Debt against Guarantor or any other obligor because it exceeds the amount permitted by law, the act of creating it is ultra vires, the officers creating ----------- it exceeded their authority or violated their fiduciary duties in connection with it, or otherwise; or (j) any payment of the Guaranteed Debt to any Noteholder or Agent is held to constitute a preference under any Debtor Relief Law or for any other reason any Noteholder is required to refund that payment or make payment to someone else (and in each such instance this Guaranty will be reinstated in an amount equal to that payment). (b) Guarantor acknowledges and agrees that any interest on any portion of the 5 Obligations which accrues after the commencement of any proceeding referred to in clause (a) above (or, if interest on any portion of the Obligations ceases to accrue by operation of law by reason of the commencement of said proceeding, such interest as would have accrued on such portion of the Obligations if said proceedings had not been commenced) shall be included in the Guaranteed Debt because it is the intention of Guarantor, Agent and Noteholders that the Guaranteed Debt which is guaranteed by Guarantor pursuant to this Guaranty should be determined without regard to any rule of law or order which may relieve Wiser U.S. of any portion of such Guaranteed Debt. Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or similar person to pay Noteholders or Agent, or allow the claim of Noteholders or Agent in respect of, any such interest accruing after the date on which such proceeding is commenced. (c) In the event that all or any portion of the Guaranteed Debt is paid by Borrowers or any other obligor, the obligations of Guarantor hereunder shall continue and remain in full force and effect or be reinstated, as the case may be, in the event that all or any part of such payment(s) are rescinded or recovered directly or indirectly from Agent or any Noteholder as a preference, fraudulent transfer or otherwise, and any such payments which are so rescinded or recovered shall constitute Guaranteed Debt for all purposes under this Guaranty. 15. Guarantor understands and agrees that any amounts of Guarantor on account with any Noteholder may be offset to satisfy the obligations of Guarantor hereunder. 16. Guarantor hereby subordinates and makes inferior any and all indebtedness now or at any time hereafter owed by Wiser U.S. to Guarantor to the Guaranteed Debt evidenced by the Credit Agreement and agrees after the occurrence of an Event of Default under the Credit Agreement, not to permit either Borrower to repay, or to accept payment from either Borrower of, such indebtedness or any part thereof without the prior written consent of each Noteholder. 17. Guarantor hereby waives any and all rights of subrogation to which Guarantor may otherwise be entitled against Wiser U.S., or any other guarantor of the Guaranteed Debt, as a result of any payment made by Guarantor pursuant to this Guaranty. 18. As of the date hereof (i) the fair value of the property of Guarantor is greater than the total amount of liabilities including, without limitation, contingent liabilities, of Guarantor, (ii) the present fair saleable value of the assets of Guarantor (including, without limitation, intangible assets such as goodwill) is not less than the amount that will be required to pay the probable liability of Guarantor on its debts as they become absolute and matured, (iii) Guarantor is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (iv) Guarantor does not intend to, nor does Guarantor believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (v) Guarantor is not engaged in a business or transaction, nor is Guarantor about to engage in a business or transaction for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which Guarantor is engaged. For purposes of this Section 18, ---------- 6 "contingent liabilities" shall be computed at the amount which, in light of all relevant facts and circumstances, represents the amount that can reasonably be expected to become an actual or matured liability. 19. Guarantor confirms that it has executed and delivered this Guaranty after reviewing the terms and conditions of the Loan Papers and such other information as it has deemed appropriate in order to make its own credit analysis and decision to execute and deliver this Guaranty. Guarantor confirms that it has made its own independent investigation with respect to Wiser U.S.'s creditworthiness and is not executing and delivering this Guaranty in reliance on any representation or warranty by any Noteholder as to that creditworthiness. Guarantor expressly assumes all responsibilities to remain informed of the financial condition of Wiser U.S. and any circumstances affecting Wiser U.S.'s ability to perform under the Loan Papers to which is a party or any collateral securing any Guaranteed Debt. 20. The Guaranteed Debt may not be reduced, discharged or released because or by reason of any existing or future offset, claim, or defense (except for the defense of complete and final payment of the Guaranteed Debt) of Wiser U.S. or any other obligor against any Noteholder or against payment of the Guaranteed Debt, whether that offset, claim or defense arises in connection with the Guaranteed Debt or otherwise. Those claims and defenses include, without limitation, failure of consideration, breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability, accord and satisfaction, usury, forged signatures, mistake, impossibility, frustration of purpose, and unconscionability. 21. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, telecopy or similar writing) and shall be given to such party at its address, telex or telecopy number set forth, in the case of any Noteholder, on the signature pages of the Credit Agreement, or, in the case of Guarantor, on the signature pages hereof, or such other address, telex or telecopy number as such party may hereafter specify for the purpose by notice to the other party. Each such notice, request or other communication shall be effective (a) if given by telex or telecopy, when such telex or telecopy is transmitted to the telex or telecopy number specified in this Section 21 and the appropriate answer back is received or receipt is ---------- otherwise confirmed, (ii) if given by mail, three (3) Domestic Business Days (as defined in the Credit Agreement) after deposit in the mails with first class postage prepaid, addressed as aforesaid, or (iii) if given by any other means, when delivered at the address specified in this Section 21. ---------- 22. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable, such provision shall be fully severable; this Guaranty shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Guaranty a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid and enforceable. 7 23. (a) Except to the extent required for the exercise of the remedies provided in the other security instruments, Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of any Texas state or federal court over any action or proceeding arising out of or relating to this Guaranty or any other Loan Paper, and Guarantor hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Texas state or federal court. Guarantor hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any Litigation arising out of or in connection with this Guaranty or any of the Loan Papers brought in district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Guarantor hereby irrevocably waives any claim that any Litigation brought in any such court has been brought in an inconvenient forum. Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such Litigation by the mailing of copies thereof by certified mail, return receipt requested, postage prepaid, to Guarantor's office at the address set forth on the signature page hereof. Guarantor irrevocably agrees that any legal proceeding against Noteholders shall be brought in the district courts of Dallas County, Texas, or in the United States District Court for the Northern District of Texas, Dallas Division. Nothing herein shall affect the right of any Noteholder to commence legal proceedings or otherwise proceed against Guarantor in any jurisdiction or to serve process in any manner permitted by applicable law. As used herein, the term "Litigation" means any ---------- proceeding, claim, lawsuit or investigation (i) conducted or threatened by or before any court or governmental department, commission, board, bureau, agency or instrumentality of the United States or of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted or existing, or (ii) pending before any public or private arbitration board or panel. (b) Nothing in this Paragraph 23 shall affect any right of any ------------ Noteholder to serve legal process in any other manner permitted by law or affect the right of any Noteholder to bring any action or proceeding against Guarantor in the courts of any other jurisdictions. (c) To the extent that Guarantor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, Guarantor hereby irrevocably waives such immunity in respect of its obligations under this Guaranty and the other Loan Papers. 24. THIS GUARANTY AND THE OTHER LOAN PAPERS COLLECTIVELY REPRESENT THE FINAL AGREEMENT BY AND AMONG NOTEHOLDERS, AGENT AND GUARANTOR AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF NOTEHOLDERS, AGENT AND GUARANTOR. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG NOTEHOLDERS, AGENT AND GUARANTOR. 25. GUARANTOR, FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RIGHT 8 TO A JURY TRIAL, IN ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE OTHER LOAN PAPERS. 26. THIS GUARANTY AND THE OTHER LOAN PAPERS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS. EXECUTED and effective as of the date first above written. GUARANTOR: T.W.O.C., INC. By:/s/ Lawrence J. Finn ----------------------------- Name: Lawrence J. Finn --------------------------- Title: Vice President -------------------------- Address: T.W.O.C., Inc. 8115 Preston Road, Suite 400 Dallas, Texas 75225 Attn: Chief Financial Officer Fax No. (214) 373-3610 9 EX-5 11 OPINION OF THOMPSON & KNIGHT EXHIBIT 5 (Thompson & Knight Letterhead Appears Here) June 13, 1997 The Wiser Oil Company 8115 Preston Road, Suite 400 Dallas, Texas 75225 Dear Sirs: We have acted as counsel for The Wiser Oil Company, a Delaware corporation (the "Company"), in connection with the Company's offer (the "Exchange Offer") to exchange its 9 1/2% Senior Subordinated Notes due 2007 to be registered under the Securities Act of 1933 (the "Exchange Notes") for any and all of its outstanding 9 1/2% Senior Subordinated Notes due 2007 (the "Outstanding Notes"). The Outstanding Notes are, and the Exchange Notes will be, fully and unconditionally guaranteed (the "Subsidiary Guaranties," and together with the Exchange Notes, the "Securities") on a joint and several basis by Wiser Oil Delaware, Inc., Wiser Delaware LLC, The Wiser Oil Company of Canada, The Wiser Marketing Company and T.W.O.C., Inc. (collectively, the "Initial Subsidiary Guarantors"). The Outstanding Notes have been, and the Exchange Notes will be, issued pursuant to an Indenture dated as of May 21, 1997 (the "Indenture"), among the Company, the Initial Subsidiary Guarantors and Texas Commerce Bank National Association, as trustee. In connection with such matters we have examined the Indenture (including the Subsidiary Guaranties contained therein), the Registration Statement on Form S-4, filed by the Company and the Initial Subsidiary Guarantors with the Securities and Exchange Commission, for the registration of the Securities under the Securities Act of 1933 (the Registration Statement, as amended at the time it becomes effective, being referred to as the "Registration Statement") and such corporate records of the Company, certificates of public officials and such other documents as we have deemed necessary or appropriate for the purpose of this opinion. Based upon the foregoing, subject to the qualifications hereinafter set forth, and having regard for such legal considerations as we deem relevant, we are of the opinion that the Securities proposed to be issued pursuant to the Exchange Offer have been duly authorized for issuance and, subject to the Registration Statement becoming effective under the Securities Act of 1933, and to compliance with any applicable state securities laws, when issued and delivered in accordance with the Exchange Offer and the Indenture, (i) the Exchange Notes will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and the Subsidiary Guaranties contained therein, and (ii) the Subsidiary Guaranties will constitute valid and legally binding obligations of the Initial Subsidiary Guarantors. 1 The opinions expressed above are limited by, subject to and based on the assumptions, limitations and qualifications set forth below: (a) The validity and binding effect of the Exchange Notes and the Subsidiary Guaranties may be limited or affected by bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or other similar laws relating to or affecting creditors' rights generally and by general equitable principles (regardless of whether such validity and binding effect is considered in a proceeding in equity or at law), and except as rights to indemnity and contribution under the Indenture (including the Subsidiary Guaranties contained therein) may be limited by applicable laws or policies underlying such laws. (b) We are members of the bar of the State of Texas and do not hold ourselves out as being conversant with the laws of any jurisdiction other than those of the State of Texas, the United States of America and, to the extent relevant to the opinions expressed above, the General Corporation Law of the State of Delaware, and we express no opinion herein with respect to the laws of any such other jurisdiction. Insofar as the opinions herein expressed relate to matters governed by New York law, we have assumed, without knowing and without making any investigation to determine, that such laws are the same as the laws of the State of Texas. Insofar as the opinions herein expressed relate to matters governed by the Province of Nova Scotia, we have relied upon the opinion of Stewart McKelvey Stirling Scales dated May 21, 1997, which is subject to certain assumptions, exceptions, limitations and qualifications set forth therein as they relate to matters governed by the laws of such Province. We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to the reference to us under the caption "Legal Matters" in the Prospectus forming a part of the Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 and the rules and regulations of the Securities and Exchange Commission thereunder. Respectfully submitted, THOMPSON & KNIGHT A Professional Corporation By: /s/ Paul M. Johnston ---------------------------------- Paul M. Johnston, Attorney 2 EX-12 12 MISC. STATEMENTS OF RATIOS EXHIBIT 12 THE WISER OIL COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS)
FIRST QUARTER YEARS ENDED DECEMBER 31, ------------- -------------------------- 1997 1996 1996 1995 1994 ------ ------ -------- -------- -------- Income before income taxes............. $8,230 $2,216 $ 10,500 $ 5,981 $ 9,432 Add fixed charges-- interest expense... 1,264 1,360 5,452 5,618 3,907 ------ ------ -------- -------- -------- Adjusted earnings...................... $9,494 $3,576 $ 15,952 $ 11,599 $ 13,339 ====== ====== ======== ======== ======== Fixed charge coverage.................. 7.5x 2.6x 2.9x 2.1x 3.4x ====== ====== ======== ======== ========
THE WISER OIL COMPANY COMPUTATION OF RATIO OF EBITDAX TO FIXED CHARGES (DOLLARS IN THOUSANDS)
FIRST QUARTER YEARS ENDED DECEMBER 31, --------------- ---------------------------- 1997 1996 1996 1995 1994 ------- ------ -------- -------- -------- Net income...................... $ 6,141 $1,511 $ 6,428 $ 2,193 $ 8,988 Add (deduct): Income tax expense............ 2,089 705 4,072 3,788 444 Interest expense.............. 1,264 1,360 5,452 5,618 3,907 Depreciation, depletion and amortization................. 5,767 4,954 19,653 19,778 18,313 Exploration costs............. 621 1,266 4,176 5,801 4,130 Property impairments.......... -- -- 12,112 4,893 -- Marketable security sales gains........................ (1,813) (2,005) (12,977) (13,101) (7,475) Dividends and interest........ (121) (212) (683) (1,241) (1,641) ------- ------ -------- -------- -------- EBITDAX....................... $13,948 $7,579 $ 38,233 $ 27,729 $ 26,666 ======= ====== ======== ======== ======== Fixed charges--interest ex- pense........................ $ 1,264 $1,360 $ 5,452 $ 5,618 $ 3,907 ======= ====== ======== ======== ======== Fixed charge coverage......... 11.0x 5.6x 7.0x 4.9x 6.8x ======= ====== ======== ======== ========
THE WISER OIL COMPANY COMPUTATION OF RATIO OF TOTAL DEBT TO EBITDAX (DOLLARS IN THOUSANDS)
YEARS ENDED DECEMBER FIRST QUARTER 31, ------------- ------------------------- 1997 1996 1996 1995 1994 ------ ------ ------- ------- ------- Net income............................ $ 6,428 $ 2,193 $ 8,988 Add (deduct): Income tax expense.................. 4,072 3,788 444 Interest expense.................... 5,452 5,618 3,907 Depreciation, depletion and amorti- zation............................. 19,653 19,778 18,313 Exploration costs................... 4,176 5,801 4,130 Property impairments................ 12,112 4,893 -- Marketable security sales gains..... (12,977) (13,101) (7,475) Dividends and interest.............. (683) (1,241) (1,641) ------- ------- ------- EBITDAX $38,233 $27,729 $26,666 ======= ======= ======= Total Debt: Current portion of long term debt... $ -- $ 20 $ 78 Long term debt...................... 78,654 74,171 78,013 ------- ------- ------- Total debt......................... $78,654 $74,191 $78,091 ======= ======= ======= Ration of total debt to EBITDAX....... N/A N/A 2.1x 2.7x 2.9x ====== ====== ======= ======= =======
EX-23.2 13 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference and the use of our report dated February 18, 1997 included in or made a part of this registration statement on Form S-4 and The Wiser Oil Company's Form 10-K for the year ended December 31, 1996. ARTHUR ANDERSEN LLP Dallas, Texas June 13, 1997 EX-23.3 14 CONSENT OF DEGOLYER AND MACNAUGHTON EXHIBIT 23.3 DEGOLYER AND MACNAUGHTON ONE ENERGY SQUARE DALLAS, TEXAS 75206 June 12, 1997 The Wiser Oil Company 8115 Preston Road, Suite 400 Dallas, Texas 75225 Gentlemen: We hereby consent to the references to our firm and to our reserves estimates in the Annual Report on Form 10-K (the Annual Report) of the Wiser Oil Company (the Company) for the year ended December 31, 1996, and in the Registration Statement on Form S-4 (the Registration Statement) relating to the Company's offer to exchange its 9 1/2% Senior Subordinated Notes due 2007 for any and all of its outstanding 9 1/2% Senior Subordinated Notes. Our estimates of the oil, condensate, natural gas liquids (shown collectively as "Oil and NGL"), and natural gas reserves of certain properties owned by the Company are contained in our reports entitled "Appraisal Report as of December 31, 1996 on Certain Properties owned by the Wiser Oil Company--Proved Reserves" and "Appraisal Report as of December 31, 1996 on Certain Properties owned by Maljamar Wiser Inc." Reserves estimates from our reports are included in the sections in the Registration Statement entitled "Business and Properties--Principal Oil and Gas Properties," "Business and Properties--Oil and Gas Reserves," and "Supplemental Financial Information for the years ending December 31, 1996, 1995 and 1994 (unaudited)--Estimated Quantities of Oil and Gas Reserves (unaudited)." Also included in the third section mentioned above are reserves estimates from our "Appraisal Report as of December 31, 1994 on Proved and Probable Reserves of Certain Properties owned by the Wiser Oil Company" and our "Appraisal Report as of December 31, 1995 on Certain Properties owned by the Wiser Oil Company--Proved Reserves." In the sections "Prospectus Summary--Summary Reserve and Production Data" and "Business and Properties--Oil and Gas Reserves," estimates of reserves, revenue, and discounted present worth set forth in our abovementioned reports have been combined with estimates of reserves, revenue, and discounted present worth prepared by another petroleum consultant. We are necessarily unable to verify the accuracy of the reserves, revenue, and present worth values contained in the Annual Report and in the Registration Statement when our estimates have been combined with those of another firm. Additionally, we hereby consent to the incorporation by reference in the Registration Statement of references to our firm and to our reserves estimates included in the Annual Report. We further consent to the specific references to DeGolyer and MacNaughton as the independent petroleum engineering firm in certain of the aforementioned sections of the Annual Report and the Registration Statement and in the "Experts" section of the Registration Statement. Very truly yours, /s/ DeGolyer and MacNAUGHTON DeGOLYER and MacNAUGHTON EX-23.4 15 CONSENT OF GILBERT LAUSTEN JUNG ASSOCIATES LTD. EXHIBIT 23.4 LETTER OF CONSENT CONSENT OF PETROLEUM ENGINEERS As independent petroleum engineers, we hereby consent to the (i) the incorporation by reference from the Annual Report on Form 10-K for the year ended December 31, 1996 of The Wiser Oil Company (the "Company"), and (ii) inclusion in the Registration Statement on Form S-4 relating to the Company's offer to exchange its 9 1/2% Senior Subordinated Notes due 2007 for any and all of its outstanding 9 1/2% Senior Subordinated Notes, of certain data from our report entitled, "The Wiser Oil Company Canada Ltd. Reserve Appraisal and Economic Evaluation effective January 1, 1997" with respect to the oil and gas reserves of the Company, the future net revenues therefrom and present values attributable to these reserves. We hereby further consent to all references to our firm included in the Registration Statement on Form S-4. Yours very truly, GILBERT LAUSTSEN JUNG ASSOCIATES LTD. /s/ Doug R. Sutton Doug R. Sutton, P. Eng Vice-President EX-25 16 STATEMENT OF ELIGIBILITY (FORM T-1) EXHIBIT 25 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------- F O R M T-1 STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ------------------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)____. TEXAS COMMERCE BANK NATIONAL ASSOCIATION (Exact name of trustee as specified in its charter) ORGANIZED UNDER THE LAWS OF 75-1992896 THE UNITED STATES OF AMERICA (I.R.S. employer (State of incorporation identification no.) if not a National Bank) P.O. BOX 2320 75221-2320 DALLAS, TEXAS (Zip Code) (Address of principal executive offices) LEE BOOCKER TEXAS COMMERCE BANK N A 600 TRAVIS HOUSTON, TEXAS 77002 (713) 216-2448 (Name, address and telephone number of agent for service) ----------------------------- THE WISER OIL COMPANY (Exact name of obligor as specified in its charter) DELAWARE 55-0522128 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification no.) 8115 PRESTON RD. SUITE 400 DALLAS, TEXAS 75225 (Address of principal executive offices) (Zip Code) 9 1/2% SENIOR SUBORDINATED NOTES, DUE 2007 (Title of the indenture securities) ITEM 1. GENERAL INFORMATION. ------------------- Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS ---------------------------------------------------------- Comptroller of the Currency Washington, D.C. Federal Reserve Bank Dallas, Texas Federal Deposit Insurance Corporation Washington, D.C. National Bank Examiners Dallas, Texas (b) Whether it is authorized to exercise corporate trust powers. Yes. ITEM 2. AFFILIATIONS WITH THE OBLIGOR. ------------------------------ If the obligor is an affiliate of the Trustee, describe each such affiliation. None. ITEM 16. LIST OF EXHIBITS. ----------------- List below all exhibits filed as part of this statement of eligibility: Exhibit 1. Incorporated by reference to exhibit bearing the same designation and previously filed with the Securities and Exchange Commission as exhibit to File No. 333-26519. Exhibit 2 Incorporated by reference to exhibit bearing the same designation and previously filed with the Securities and Exchange Commission as exhibit to File No. 333-26519. Exhibit 3. Incorporated by reference to exhibit bearing the same designation and previously filed with the Securities and Exchange Commission as exhibit to File No. 333-26519. Exhibit 4. Incorporated by reference to exhibit bearing the same designation and previously filed with the Securities and Exchange Commission as exhibit to File No.333-26519. Exhibit 5. Not applicable. Exhibit 6. Filed herewith. Exhibit 7. Incorporated by reference to exhibit bearing the same designation and previously filed with the Securities and Exchange Commission as exhibit to File No.333-26519. Exhibit 8. Not applicable. Exhibit 9. Not applicable. The answer to Item 2 is based in part on information provided or confirmed by the obligor. The accuracy and completeness of such information is hereby disclaimed by the Trustee. 2 SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Texas Commerce Bank National Association, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Dallas, and State of Texas, on the 11th day of June, 1997. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ JOHN G. JONES ------------------------------------------ Name: John G. JoneS TITLE: Vice President and Trust Officer 3 EXHIBIT 6 Texas Commerce Bank National Association, as a condition to qualification under the Trust Indenture Act of 1939, consents that reports of examinations by federal, state, territorial, or district authorities may be furnished by such authorities to the Securities and Exchange Commission of the United States upon request of said Commission for said reports, as provided in Section 321 of said Trust Indenture Act of 1939. TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: /s/ JOHN G. JONES --------------------------------------- Title: Vice President and Trust Officer Date: June 11, 1997 4 -----END PRIVACY-ENHANCED MESSAGE-----